Dutch economy to recover from Covid faster than expected

The outlook for the Dutch economy is favorable and permanent damage from the coronavirus crisis will remain limited. The economy will also grow more than expected, by 3.2 percent this year instead of the 2.2 percent growth expected in March, central planning office CPB said in its latest estimate.

"Despite the corona pandemic, the Dutch economy is in relatively good shape," CPB director Pieter Hasekamp said, NOS reports. "The support policy worked well to dampen the effects on the labor market and production and to prevent major permanent damage."

Initially there were major concerns that the coronavirus crisis would lead to an increase in unemployment. Those concerns proved to be largely unfounded. The CPB currently expects a decrease in unemployment this year, followed by an increase to 4.1 percent of the working population next year. That is about the same level as the average unemployment in the years before the crisis.

On Tuesday morning, Statistics Netherlands also announced that consumer spending increased by 9.4 percent in April - the biggest increase since the stats office started keeping track of consumer spending around World War II. CPB also expects that consumers will spend more in the coming period, after spending less during the pandemic.

Economic growth could be even higher if Netherlands residents start spending the massive amount in savings they built up last year, the CPB said. Though a study by Rabobank recently revealed that most people don't plan on spending their savings in the near future.

Purchasing power will see only a tiny increase in the coming years, at 0.6 percent this year and 0.3 percent next year. Companies are reluctant to raise salaries and inflation is expected to rise to 2 percent this year, CPB said. Though it added that inflation is an "uncertain factor", so these percentages may change a bit.

The CPB expects that the national budget deficit will amount to 5.9 percent this year and 1.5 percent next year, provided that the coronavirus support measures have been phased out by then.