If the cabinet extends the current lockdown measures, this will cause the Dutch economy to go into recession. Various economists have expressed this expectation against NU.nl, in the run-up to the government’s press conference that will take place on Tuesday evening. “We are going back to the level of spring 2020, at the time of the first wave,” said macro economist Marcel Klok of ING. “But a quick recovery is still possible.”
A recession occurs when the gross domestic product (GDP) shrinks for two consecutive quarters. In the last months of last year, the economy has probably already shrunk due to the severe lockdown in mid-December. If the cabinet on Tuesday, as expected, comes with an extension of the contact-restricting measures, it will probably cause a further contraction.
“We previously assumed slight growth in this quarter, but we are now abandoning that idea,” says Carlijn Prins, senior economist at Rabobank. “And the fourth quarter of 2020 was probably also worse than the previous quarter.” Prins does not yet dare to say exactly how high the shrinkage will be in the first months of this year.
ING colleague Klok takes into account that in the first quarter of this year the economy will shrink to the same level as in the second quarter of last year, when the economy suffered an unprecedented hit of 8.5 percent. Since then there has been a solid recovery.
Due to the strict lockdown that started in mid-December, that recovery will turn into a new contraction, he expects. “We think the economy came in at a minus of 2 percent in the last quarter of last year. And for the current period we expect a sharper decline due to the ongoing lockdown. Compared to the period before the COVID-19 outbreak, I think. that we are about 10 percent lower in the first quarter of this year. “
Rapid recovery due to limited number of bankruptcies and layoffs
Nevertheless, both are convinced that a speedy recovery is still possible once the second wave is largely over and vaccinations are on a large scale. A factor is that the number of bankruptcies in 2020 was the lowest in years and that unemployment – to the surprise of many – has actually fallen in the last months of last year.
“I expect that a rapid recovery will still occur as soon as the cabinet relaxes the lockdown measures,” says Klok. “Both consumers and companies can then spend more. But the longer the lockdown lasts, the slower the recovery. The number of bankruptcies is increasing and more people are losing their jobs.”
Prins also thinks that a quick recovery is possible. “We have seen in the summer months that the economy rebounded and largely offset the contraction of the spring. That could happen again this year. Many companies have survived and many people have kept their jobs. and services up to standard. We do not expect a full recovery until next year. “
Unemployment is rising, not only among flex workers
Even if the lockdown measures are quickly lifted, a lagging effect will occur this year, Prins thinks. According to her, this is because some of the companies will not be able to keep their heads above water.
“In addition, many companies take a while before they can implement their reorganization plans. This is causing a delay in the unemployment figures. Partly because of this, we expect the number of people without a job to increase this year, while permanent contracts are not neglected. does not hinder a recovery. “