Dutch economy notes the biggest decline ever in the second quarter of 2020

The consequences of the world pandemic have hit the Dutch economy hard. Although a decline was expected, according to the first calculation by CBS (Statistics Netherlands), the gross domestic product (GDP) fell by 8.5 percent in the months of April, May and June, compared to the first quarter of 2020. This was the period of the smart lockdown, during the peak of the corona virus in the Netherlands. Such a large reduction had never occurred before in the history of the CBS. De Volkskrant newspaper reports that things have never slowed down as much, even during the latest financial crisis (when GDP fell ‘only’ 3.6 percent, at the lowest point in 2009) and the depression of the 1930s. The current decline is truly unprecedented.

In the first half of 2020, national government debt increased by 48 billion euros. In the first two months of this year, it had declined. Due to emergency measures implemented during the corona crisis, the government received less tax, its most important source of income.

More than half of the fall can be attributed to a decline in household consumption. As expected, investments, trade, catering, transport and storage are among the most affected sectors, together with employment and travel agencies. CBS reports the catering industry is one of the most affected sectors. Turnover in the hotel and catering industry declined by slightly more than half in the second quarter of 2020 compared to the previous quarter. In the first quarter, sales had already fallen by almost 14 percent.

The vast majority of exports has evaporated. Fewer machines and fewer petroleum products were exported, and fewer services were available since the tourist sector saw its source of income completely dry up. Contrary to what one might expect, De Volkskrant says the flower sector did well, since it is mainly dependent on domestic sales, which even increased during the corona crisis.

Other countries in Europe hit worse than the Netherlands
Other countries in Europe suffered even worse: the United Kingdom lost more than 20 percent of its GDP in the same period, Germany more than 10 percent, France almost 14 percent. It is hard to say why the Netherlands is not doing as bad as its neighbours, according to the chief economist of Statistics Netherlands, Peter Hein van Mulligen. “The intelligent lockdown system may play a role, but that cannot be the whole explanation, because Sweden, which barely had a lockdown at all, has been hit about as hard as we have.”

So, overall, the Dutch got away ok so far. Whether this means that the Netherlands will be a frontrunner in the recovery is still unknown. “In general, you could say that the deeper you go, the more you can recover,” Van Mulligen outlines. “In that respect, the outlook for the British is very good.”

Unemployment: an important indicator of the economy
In the second quarter, around 322,000 jobs were lost in the Netherlands, about 3 percent of the total workforce. This figure is still too positive, according to CBS, since the number of hours worked fell by 6 percent in the same period. This is because many people were furloughed, but still had jobs. For the time being, government support has worked well: companies were able to retain staff, although there was no work for them. In the first 35 weeks of 2020, 2,370 companies and institutions (including sole proprietorships) went bankrupt, 153 fewer than in the same period in 2019.

Those who had permanent jobs were usually able to get through the crisis. The struggle was mainly felt by flex workers, employees with annual and zero-hour contracts, young people and people with low-skilled jobs. Many self-employed also experienced a reduction in income, depending on the sector. If the recovery continues, these people will probably get back to work soon. Then the damage, although immense, may still be manageable.

For a few weeks, the Netherlands was under the assumption that the worst had passed, and after the relaxation of the corona measures, people went out happily again. The consequences of this are now showing. Here and elsewhere in Europe, the number of infections is increasing rapidly. If the Netherlands is not careful, a second lockdown may be necessary. If the economy shuts down again, the consequences will be much more serious.

Written by Raphael Perachi Vierira