The Dutch economy will shrink by 5% in 2020, assuming there are no more large-scale new restrictions needed to combat coronavirus, the government’s main forecasting agency said in its pre-budget report.

This contraction will be followed by growth of 3% in 2021, the CPB said in its summer forecasts, which form the basis of the government’s spending plans for next year.

Should large-scale physical contact restrictions be implemented again, the economy will also shrink in 2021, and unemployment will increase to 10%, the CPB said.

‘The Netherlands is affected less severely by the corona crisis than some other countries. But, make no mistake, the magnitude of the negative impact is unprecedented and, for the most part, still has to make itself felt,’ CPB director Pieter Hasekamp said.

Hasekamp said there will be a delayed impact in the form of unemployment and bankruptcies and that job and income security varies widely between sectors.

‘Moreover, now more than ever, it is important to look beyond GDP,’ he said.  ‘Neighbourliness, family visits and home schooling cannot be captured in economic growth figures. The corona crisis also has major consequences for things that affect quality of life.’

The CPB projections are based on government policy up to the end of July and so assume the government’s financial support policies will not continued in October.  However, some new form of support is very likely and prime minister Mark Rutte said earlier this month the cabinet is thinking ‘very carefully’ about what a third package of measures should include.

Ministers are currently finalising their spending plans for 2021, which is also an election year and the budget will be presented to parliament on September 15.

Photo: DutchNews.nl

https://www.cpb.nl/en/august-projections-2020-2021