CPB’s Director, Pieter Hasekamp: ‘It is clear the coronavirus already has a negative effect on the Dutch economy. Without containment of the virus, it will continue to influence economic growth negatively” 

In case of limited effects of the coronavirus (the central scenario), the Netherlands will continue to see steady economic growth, in 2020 and 2021. Given the exceptionally low growth in world trade and the slight growth in the countries surrounding the Netherlands, the Dutch economy is doing relatively well. Unemployment is at a historically low level and is projected to remain low for the time being. The tight labour market is resulting in stronger wage increases. Combined with decreases in the tax burden, this will lead to a 2.1% increase in purchasing power in 2020 and 1.3% in 2021. The budgetary surplus will decrease to 0.1% of GDP.

In its analysis, CPB calls attention to the finding that children of low-income parents have a considerably lower chance of earning a high income themselves than the children of parents who are better off.  There is a broad consensus in favour of equal opportunities for children, but the type of family you are born into really makes a difference. Policy that is aimed to increase opportunities, such as investments in preschool education, may help. This will benefit children as well as the economy. Unequal opportunities are missed opportunities.’

Apart from the coronavirus, there are also other uncertainties surrounding the projections. US trade politics remain unpredictable. And, although a disorderly Brexit has been averted, new uncertainties are looming about the timely creation of a trade relationship between the United Kingdom and the European Union. In the Netherlands, the impact of issues around nitrogen and PFAS remain uncertain, and growth may be higher if wages were to increase more rapidly than foreseen in these projections.

Also in the medium term, growth will remain at around 1.5%, which is substantially higher than reported in CPB’s medium-term outlook of last November. The revision is largely due to the new higher population forecasts by Statistics Netherlands (CBS). Government finances are projected to improve over the coming Cabinet period, because of the higher economic growth, which in turn will lead to the smaller sustainability gap of 0.8%.