Coronavirus could cause recession in Netherlands, central bank director says

De Nederlandsche Bank
De Nederlandsche BankPhoto: Kaihsu/Wikimedia Commons

Klaas Knot, director of Dutch central bank DNB, does not rule out the possibility that the coronavirus pandemic will bring the Dutch economy into a recession. "You don't need a very serious corona scenario, on top of what we expect now, for our economy to also come close to a recession," he said to Nieuwsuur after a meeting at the European Central Bank (ECB).

A recession is when the economy shrinks for at least two consecutive quarters. According to Knot, it is difficult to make any predictions now that Covid-19 is still spreading. "When the virus is under control, we can estimate how long it will take and how much damage there will be. As long as that is not the case, we will depend on different scenarios and that will provide a very wide range of possible outcomes." But he added: "We are sure there will be damage."

Last week central planning office CPB estimated that the Dutch economy would grow 1.4 percent this year, but warned that the corona outbreak could mean that growth is 0.8 percent lower. "I think that's an optimistic scenario," Knot said. "That assumes that the virus will get under control very quickly. There are also other scenarios that are less favorable."

The ECB announced measures on Thursday to help deal with the consequences of the Covid-19 outbreak. An extra 120 billion euros will be pumped into the economy this year, to make it easier for banks to lend money to companies affected by the outbreak. "Our package is mainly to say to the banks: we ensure that you remain financed, then you ensure your customers remain financed," Knot explained to Nieuwsuur.