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Coronavirus impact: Recession in the Netherlands inevitable

Coronavirus impact: Recession in the Netherlands inevitable

Coronavirus impact: Recession in the Netherlands inevitable

Coronavirus is shaking up the country in more ways than one. According to the Netherlands Bureau for Economic Policy Analysis (CPB), a recession is inevitable, it just depends on how deep said recession will be and how long it will last. 

Four recession scenarios

Right now, there are four scenarios for the development of the economy in 2020. Each scenario involves a recession, but in three of the four, the shrink will be worse than it was in the credit crisis 12 years ago. In the best-case scenario, the restrictions in place to prevent the spread of coronavirus will be in place for three months, the economy will shrink by 1,2 percent and then rebound in the third quarter after a short but substantial dip. In this scenario, the unemployment rate increases slightly to four percent- it’s currently at 3,4 percent.

In the worst-case scenario, restrictions will be in place for 12 months and GDP will decrease by 7,7 percent in 2020 and by another 2,7 percent in 2021. In this case, the economy will only recover a year later and additional problems will arise in the financial sector and abroad. Moreover, in this scenario, unemployment is predicted to peak at 9,4 percent in 2021. 

CPB director Pieter Hasekamp explains that “government policy is aimed at limiting layoffs and bankruptcies. That prevents a downwards spiral and lasting economic damage.” “Nevertheless, the government can only cushion part of the blow at best. The longer the crisis continues, the greater the economic damage will be.” It should also be noted that these are simply predictions and that the reality could be better or worse. 

A health crisis first and foremost

Hasekamp iterates that, “coronavirus is first and foremost a health crisis”. He emphasises that the measures being taken are necessary but that it is clear that these have a big effect on the economy. 

At this point in time, much is uncertain about the effect coronavirus will have on the Dutch economy, as it is unclear as to how long the current measures will be in place. Additionally, such far-reaching measures have never before been used, which makes it harder to predict the effect they will have. 

Mina Solanki

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Mina Solanki

Completed her Master's degree at the University of Groningen and worked as a translator before joining IamExpat. She loves to read and has a particular interest in Greek mythology. In...

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Kevin G 17:35 | 27 March 2020

Ze hebben het over een recessie? Nederland is nummer 10 in de meest RIJKE landen ter wereld die ik niet begrijp

Nelson Iwejua 18:11 | 27 March 2020

Mina u have written brilliantly however u must not forget that the corona virus is now a world wide phenomenon. All nations of the world are facing the same problem therefore the Dutch is not alone ìn this. Solving the problem going forward demands collaboration so that no nation bears the burden alone. The Netherlands can not walk alone but I see light at the end of the tunnel. Thanks.