June 16, 2020

June forecast 2020

Unprecedented 6% decrease in GDP in 2020, amid great uncertainty

Press release
Social distancing measures to counter the pandemic, in the Netherlands, have led to an unprecedented decline in economic activity of between 10% and 15%. Because of the considerable uncertainty about the course of the pandemic and the rate of recovery of the economy, the recently published June projections by CPB Netherlands Bureau for Economic Policy Analysis contain various scenarios. Under the baseline scenario, which assumes a moderate recovery, GDP would decrease by 6% in 2020, followed by an increase of 3% next year. Unemployment would double, but, although public finances would be severely impacted, they would not enter the danger zone. CPB’s Director Pieter Hasekamp: ‘Current uncertainty poses major dilemmas for the government. During the recovery phase, a controlled phase-out of government support measures would be desirable, but the extent to which the government can withdraw depends on the pace of economic recovery. Recovery could be accelerated by an internationally coordinated approach to the crisis, and by moving up investments where possible, such as in housing construction and energy transition.’
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Baseline scenario projections: 2019 2020 2021
Unprecedented decrease in GDP, followed by partial recovery 1.8 -6 3
Rapid increase in unemployment 3.4 5 7
Large budget deficit 1.7 -8 -5
Debt stabilises at a substantially higher level (% of GDP) 48.7 62 61

If a second wave of infections would lead to renewed social distancing measures, companies will face additional production problems as well as a further decline in the demand for their products and services, with financial buffers already close to depletion. Under this scenario, GDP would decrease also in 2021, with unemployment rising to 10% and public debt increasing to over 75% of GDP.

The pace of recovery could be less favourable due to major economic problems on the side of trading partners of the Netherlands. In case of lagging economic recovery on an international level, banks may find themselves in trouble, both in the Netherlands and abroad. This would further dampen the recovery via credit provisioning. Under such a scenario of weak economic recovery, there would be no growth in GDP in 2021, with unemployment rising to more than 10% and public debt increasing to over 75% of GDP.

It is also conceivable that economic recovery will occur more rapidly, if lifting social distancing restrictions would lead consumer optimism. Increased catch-up spending among households and increases in business investments to capitalise on new opportunities, could limit the increase in unemployment. Under such a scenario of strong recovery, by 2021, GDP may increase beyond the 2019 level.

Spokesmen

Foto Suzanne van Gils
Suzanne van Gils +31 6 21560776 Read more

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June 16, 2020

Forecast June 2020, figures

Social distancing measures to counter the pandemic, in the Netherlands, have led to an unprecedented decline in economic activity of between 10% and 15%. Because of the considerable uncertainty about the course of the pandemic and the rate of recovery of the economy, the recently published June projections by CPB Netherlands Bureau for Economic Policy Analysis contain various scenarios. Under the baseline scenario, which assumes a moderate recovery, GDP would decrease by 6% in 2020, followed by an increase of 3% next year. Unemployment would double, but, although public finances would be severely impacted, they would not enter the danger zone.
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Economic growth in the Netherlands

Table 'Main economic indicators', 2018-2021, June 2020

International items
  2018 2019 2020 2021
Relevant world trade volume goods and services (%) 3.4 3.1 -10.6 6.5
Export price competitors (goods and services, non-commodities, %) -0.6 2.0 0.6 0.6
Crude oil price (dollar per barrel) 70.9 64.3 37.5 39.7
Exchange rate (dollar per euro) 1.18 1.12 1.09 1.09
Long-term interest rate the Netherlands (level in %) 0.6 -0.1 -0.3 -0.2
GDP and demand (volume)
  2018 2019 2020 2021
Gross domestic product (GDP, economic growth, %) 2.6 1.8 -6.4 3.3
Household consumption (%) 2.3 1.4 -7.3 4.0
Government consumption (%) 1.6 1.8 1.5 3.6
Capital formation including changes in stock (%) 2.2 4.7 -10.3 3.2
Exports of goods and services (%) 3.7 2.4 -10.1 5.5
Imports of goods and services (%) 3.3 3.1 -9.8 6.4

Prices, wages and purchasing power
  2018 2019 2020 2021
Price gross domestic product (%) 2.2 3.0 2.5 1.0
Export price goods and services (non-energy, %) 1.0 0.8 0.5 1.0
Import price goods (%) 2.7 -1.2 -4.4 1.1
Inflation, harmonised index of consumer prices (HICP, %) 1.6 2.7 1.1 1.5
Compensation per hour private sector (%) (a) 1.8 3.2 7.7 -2.7
Wages as determined in collective labour agreements, private sector (%) 2.0 2.4 2.6 1.4
Purchasing power, static, median all households (%) 0.1 1.0 2.3 0.5
Labour market
  2018 2019 2020 2021
Labour force (%) 1.2 1.6 -0.6 0.3
Active labour force (%) 2.3 2.0 -2.1 -2.0
Unemployment (in thousands of persons) 350 314 445 645
Unemployed rate (% of the labour force) 3.8 3.4 4.8 7.0
Employment (hours, %) 2.2 2.0 -6.8 3.3
Other items
  2018 2019 2020 2021
Labour share in enterprise income (level in %) 73.1 74.0 74.5 75.6
Labour productivity private sector (per hour, %) 0.6 0.1 0.6 0.1
Private savings (% of disposable household income) 2.8 3.2 11.1 8.4
Current-account balance (level in % GDP) 11.2 10.2 8.9 9.6
Public sector
  2018 2019 2020 2021
General government financial balance (% GDP) 1.5 1.7 -7.6 -4.7
Gross debt general government (% GDP) 52.4 48.7 61.5 61.1
Taxes and social security contributions (% GDP) 38.7 39.3 37.6 37.7
Gross government expenditure (% GDP) 42.5 42.3 49.9 46.9

(a) The NOW wage cost subsidy, and the continuity contribution to health care, have an upward effect on the wage mutation in 2020 of 5.7%-points and a downward effect of 4.6%-points in 2021.

Contacts

Foto Diederik Dicou
Diederik Dicou +31 6 22827239 Read more
Foto Sander van Veldhuizen
Sander van Veldhuizen +31 6 11648608 Read more
Foto Wim Suyker
Wim Suyker +31 6 52485860 Read more

Contacts

Foto Diederik Dicou
Diederik Dicou +31 6 22827239 Read more
Foto Wim Suyker
Wim Suyker +31 6 52485860 Read more
Foto Sander van Veldhuizen
Sander van Veldhuizen +31 6 11648608 Read more