Harsher Covid measures now will mean quicker economic growth: Dutch central bank
Despite the government being expected to announce a hard lockdown in the Netherlands this evening, Dutch central bank DNB is still quite positive about the Dutch economy. If the restrictive measures and vaccines are effective, the economy will quickly pick up steam again, DNB director Olaf Sleijpen said to NOS.
According to Sleijpen, it's better to intervene with harsh measures now, than continuing to implement milder measures that prove to be insufficient. "The expression 'gentle healers make smelly wounds' fits here," he said. "A policy of running and stopping is not wise from an economic point of view."
DNB calculated three scenarios for the Dutch economy, depending on how the pandemic develops. These range from 4.9 percent economic growth next year in the mild scenario, to 0.2 percent growth in the severe scenario. These calculations were done before it was announced that the government would implement new measures today.
If the strict lockdown is implemented as sources say and lasts until the end of January, the Dutch economy will grow around 1 or 2 percent next year, DNB calculated. "It has a short-term effect on the economy, but if you are effective you will then come closer to the mild scenario."
The central bank is not yet concerned about the pandemic's effect on public finances and banks. They were both in excellent shape before the coronavirus, and can withstand some major blows. The government deficit is rising rapidly, to 6.3 percent of GDP this year. But debt to GDP is not yet an issue at just over 60 percent, "especially compared to other European countries," DNB said.
DNB also subjected the Dutch banks to a "coronavirus stress test" and found that even if the vaccines turn out to not work sufficiently, and the Netherlands is faced with restrictive measures until the end of next year, the banks can still cope and continue to supply credit to citizens and companies. "But vigilance is still required," Sleipjen said.