Dutch economy will take years to recover from Covid-19 crisis: Planning office
The coronavirus crisis will cause long lasting damage to the Dutch economy, even if the virus is completely under control soon, according to central planning office CPB. The unemployment rate is expected to return to normal levels after five years. But the labor supply and investments will only recover after ten or more years, the CPB said on Tuesday.
"People who become unemployed and find a new job often lose part of their income for a long time. This is especially true if they have had no work for a longer period of time and therefore lose skills and knowledge," The CPB said. Long-term health problems after a Covid-19 infection may also play a role here.
The supply of employees will decrease, because people will give up on finding a job. The higher unemployment also makes the Netherlands less attractive for foreign workers. Students will graduate later, or forgo further education. The labor supply and investments will only recover in the long term - ten years or more, the CPB expects.
All in all this will lead to lower growth for the Dutch economy. The CPB expects that the economy will be back to pre-coronavirus levels at the end of next year. "That does mean that we missed out on two years of economic growth," the planning office said.
In the short term, a mismatch in the labor market is also a concern, the planning office added. Some sectors are hit hard by the coronavirus crisis and are shedding employees en masse, while in other sectors the demand for labor is increasing. This mismatch may be reinforced if it turns out that the crisis accelerated the growth of automation, robotization, and digitization.
But eventually the labor market will return back to normal - people will find work again, make up their wages, or retire. Employees will also adapt to the new situation, the CPB said.