The consequence of the coronavirus outbreak throughout the world is likely to result in financial strain across the globe — including in the Netherlands.
Coronavirus has essentially put the world on a time-out. People are quarantined to their homes, shops have shut their doors, and restaurants are no longer open for business. And we don’t know exactly how long this will last. Naturally, there are consequences.
The world wasn’t “built to be shut down”
In the US, much to the chagrin of health experts, President Donald Trump stated in a press interview that “our country wasn’t built to be shut down. This is not a country that was built for this.” He has suggested that the situation would only last in the US for a few weeks. In reality, experts say it will likely be much longer.
But what Trump says resonates with the rest of the world as well. This world was not built to take a break, let alone one without a firm end. A recession now appears to be looming in the future, and not just for the US. The Netherlands and most other countries will feel it too.
Unemployment on the rise
According to the NOS, despite all the measures taken by the Dutch government (i.e. facilitating social assistance for people to work from home easier), greater unemployment rates are a likely possibility.
The Central Planning Bureau (CPB) reports that three months of restrictions (as of now some will be in place till June 1) will result in a shrinkage of the Dutch economy by 1.2% and an increase in 4% of unemployment rates. However, next year it will improve.
If restrictions last for six months or longer, statistics rise: The economy will shrink by 7.7% this year with an increase of 8% in the unemployment rate. And if the restrictions continue for a full year, a 10% decline in the economy will occur with an unemployment rate of over 9%.
To put this into perspective, during the 2009 recession the economy shrunk by 3.7%. In short, the longer the restrictions, the greater the economic damage.
The unemployment rate in the Netherlands is currently at 2.9%, with 274,000 unemployed. In the worst case, this number will more than triple, amounting to 850,000 unemployed by 2021. These numbers are worse than the outcomes of the last recession, where in February 2014, unemployment was at 699,000.
Although public finances will deteriorate, national debt will not enter the danger zone according to the CPB. In the worst-case scenario, it will reach 73.6% by the end of next year.
Trying to mitigate the damage
Of course, governments around the world are aware of this, and are trying to keep the economy afloat as much as possible (i.e. by keeping businesses open). But at the end of the day, the spread of coronavirus is a matter of public health — and this must be prioritised.
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