The Dutch economy has so far made it through the corona crisis relatively successfully. This is the conclusion of both the Central Planning Bureau (CPB) and the International Monetary Fund (IMF).
On Tuesday, the IMF published its so-called Article IV consultation of the Netherlands, a periodic review of financial and economic policy. The report states that the Dutch economy has weathered the pandemic well, with a recession in 2020 that was less deep than the eurozone average, and a recovery in 2021 that was stronger than average. The high degree of digitization in the Netherlands, with an extensive network of fast internet connections, has contributed to this, as has the policy pursued.
The fact that there was relatively much fiscal space in comparison with many other euro countries contributed to this. Not only have jobs been protected and businesses afloat, but the economic recession has also been prevented from spreading to the financial sector. Banks have good capital buffers, unemployment is back to pre-pandemic levels and the number of bankruptcies remained low.
For this year, the IMF forecasts economic growth of 3.8 percent, which is largely in line with most other forecasts, such as those of the CPB and De Nederlandsche Bank. In the fourth quarter of this year, the IMF expects Dutch GDP to surpass pre-pandemic levels.
Also read: The crisis is not over yet, the corona support is
New virus variants
However, there are risks: the pandemic could flare up again, perhaps due to new virus variants. It also remains to be seen how business will hold up without the support of corona measures; for example, the NOW scheme will end on 1 October. There also remains a risk for the banking sector, due to the financing of housing that has risen sharply in price.
Conversely, the economy could benefit even more from a faster recovery in the rest of the eurozone, and consumers could spend more of their increased savings during the pandemic.
The Dutch budget deficit, which will rise to 6.1 percent of GDP this year, could fall to 2 percent next year, according to the IMF. A balanced budget can then be achieved again in 2025.
According to the CPB, which has only examined the past year, the economic support measures have prevented an increase in unemployment by 65,000 to 180,000 people in 2020. The government spent 3.6 percent of gross domestic product (GDP) on aid last year. That is more than the eurozone average of 3.3 percent. NOW wage support appears to have been the most generous of all European countries.
The Planning Bureau does conclude that the effectiveness of the corona support policy was high, but that its effect decreased over time. It points out that much of the support has gone to companies with low productivity and shaky financial position. These are companies that, according to the CPB, were already less viable before the pandemic. There is therefore a good chance that non-viable companies have continued to exist as a result of the corona support.
The IMF also holds the Netherlands accountable for its climate policy; that should strengthen it. Current policies are unlikely to meet national climate targets. The Dutch course is also not entirely in line with the European climate ambitions that European Commissioner Frans Timmermans presented in July.
The Dutch corona policy was economically successful, according to the IMF and the CPB
Source link The Dutch corona policy was economically successful, according to the IMF and the CPB