CPB: Coronavirus vaccines lead to positive economic outlook for 2021
The Netherlands Bureau for Economic Policy Analysis (CPB) has published its economic projections for 2021, stating that the Dutch economy “will recover...provided coronavirus is under control.”
CPB less pessimistic about economic growth in 2021
CPB’s baseline projections assume that the recent developments in numerous coronavirus vaccine trials mean that the Netherlands (and Europe) will be able to get the virus under control in the first half of 2021. Should this happen, they expect the Dutch economy to grow by nearly 3 percent over the course of the year.
Interestingly, the CPB projections published on November 26 differ slightly from those published as part of Prinsjesdag on September 15: now, their projected growth rates are slightly higher for 2020 and slightly lower for 2021. This is due to the second wave of the coronavirus, but also a strong and unanticipated economic recovery in the third quarter of this year.
Pieter Hasekamp, director of the CPB, said in a statement: “The second corona wave does not lead to a fundamentally different economic outlook for 2021. However, certain sectors, such as the hospitality industry, culture and tourism, will once again be severely affected by new physical contact restrictions.” He also highlighted the importance of the financial support schemes set up by the Dutch government in allowing for the country’s continued economic development.
|Baseline projections: Main Economic Indicators||2019||2020||2021|
|Partial GDP recovery in 2021 (%)||1,5||-4,2||2,8|
|Further increase in unemployment in 2021 (%)||3,4||4,1||6,1|
|Lower increase in static purchasing power next year (%)||1||2,2||1|
|Large government deficit next year (% of GDP)||1,7||-6,1||-4,6|
|Debt ratio levelling off at substantially higher level (% of GDP)||48,7||56,7||59|
Unemployment will continue to rise
While on the whole CPB remains positive about the future of the Dutch economy, they predict that unemployment will continue to rise over the few months to reach 6 percent in 2021. They expect the younger generations, employees working on flexible contracts, and the self-employed to be the most affected. However, in their midterm outlook, also published on November 26, CPB projects unemployment will gradually decline between 2022 and 2025, to reach 4,5 percent.
The economic recession brought on by the ongoing global coronavirus crisis will also have a negative impact on employee wages. The standard wage increases outlined in the collective labour agreements will decline from 2,5 percent in 2020 to only 1,4 percent in 2021.
The effect of coronavirus on the Dutch economy
In their projections, the CPB highlights the vital role coronavirus plays in the economic recovery in the Netherlands. The progress reported in the Moderna, AstraZeneca, and Pfizer/BioNTech trials have provided some hope for future recovery, as there now seems to be a realistic end-date in sight.
However, so as not to pin too much hope on the development and roll-out of a successful vaccine, CPB has also included a start-stop scenario in their projections, that consider the impact of further waves of the virus and the lack of an (effective) vaccine. Under these scenarios, they predict the Dutch economy will contract by around 1 percent in 2021, and that unemployment will rise to over 8 percent by the end of next year.
Lastly, many people have expressed concern about the effect of the various lockdowns on the country’s economic growth. CPB state, however, that while the lockdowns did limit public spending, consumers would’ve spent less money anyway as a result of the virus: without drastic and restrictive measures, the virus would’ve spread more, and so the public would’ve been hesitant to risk their health by going out to shops or restaurants.