Dutch Central Bank warns of harsh recession, high unemployment

The effects of the coronavirus pandemic on the Dutch economy will be felt for years yet to come, according to the new estimate by Dutch central bank DNB. This year the Dutch economy swill shrink by 6.4 percent, almost twice as hard as during the credit crisis of 2009. And unemployment will increase to 4.6 percent of the working population this year and to 7.3 percent next year.

"The real GDP per capita is dropping in one foul swoop to 2015 levels this year," DNB said. The biggest negative effects of the pandemic are expected to show themselves in the second quarter. "This is not only due to the initial shock of the lockdown, but also because of the further consequences for spending."

Declining consumer confidence, more uncertainty and loss of income will result in households, companies and foreign customers reducing their spending considerably, according to the central bank. Private consumption is expected to shrink by 7.6 percent this year, business investment by 13.9 percent, and exports by 10.9 percent. 

Inflation will remain low in the coming years, standing at 0.8 percent this year, 1.1 percent in 2021, and 1.5 percent in 2022. 

Public finances will show a major turnaround, going from a comfortable surplus last year to a deficit of 6.4 percent of GDP this year. "The government will also be writing red numbers in 2021 and 2022." 

DNB expects that the Dutch economy will slowly but surely start to recover in the second half of 2020, resulting in GDP growth of 2.9 percent in 2021 and 2.4 percent in 2022. Unemployment will start to decrease, to 5.7 percent, in 2022, the bank expects. 

The DNB warns that there is currently much uncertainty about the further developments of the coronavirus pandemic, as well as the effectiveness and consequences of contact-limiting measures. This means that economic forecasts may change significantly in the coming period.