Is the corona recession getting as bad as after 2008 (or worse)?

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                              The Netherlands is entering a recession. But how bad is that crisis going to be? There is a significant chance that the economy will shrink more than in 2009. But there are also bright spots.

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        <p>The Netherlands Bureau for Economic Policy Analysis (CPB) is all about it today: the Netherlands will in any case be faced with a recession as a result of the corona crisis.

CPB has made four scenarios to make a very cautious estimate of the economic blows that we can expect, depending on how long the corona measures (such as working from home and not going to the pub) will last. This is what these scenarios look like:

Scenario 1: Short but hard blow, then rapid growth again

In the most optimistic scenario, CPB assumes that the rules on contact restriction (or social distancing) will last a total of three months. Events, catering and the tourism sector suffer greatly from this.

In this scenario, the economy shrinks by 1.2 percent. The shrinkage is mainly in the first half of the year, after which it will pick up again. Due to the temporary emergency measures of the cabinet, the blows are not too bad; few people need to be fired. In 2021 we will again grow by 3.5 percent.

Unemployment is rising slightly in this scenario. This will amount to 4.5 percent in 2021. It is now at a low level: 2.9 percent.

Scenario 2: Bigger blow, then growth

It may also be the case that we do not have social distancing rules for three months, but six. Then the blows get harder. Not only the services sector, but industry is also struggling. Production stops in some places, so some factories do not have enough parts to make their products.

The economy will shrink by 5 percent in 2020. And will rise again to a growth of 3.8 percent in 2021.

This also has an effect on the labor market: some temporary contracts are not renewed and young people who have just graduated find it more difficult to find a job. About 5.3 percent will be unemployed at home in 2021.

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                    Also watch this interview with the CPB:
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                CPB: economy is hit hard by the corona crisis.
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        <h2>Scenario 3: A very hard blow, a lot of unemployment, then some recovery</h2>

But in those six months, the problems can also spread to the financial sector, because many people can no longer pay off their loans. The problems then grow. House prices are falling sharply. It is more difficult for companies to obtain loans that they so badly need.

The economy is shrinking enormously in this scenario: by 7.7 percent. That is a very big blow. We will grow again in 2021, but by 2 percent.

Many companies have to fire people in this scenario. Unemployment will rise to 8.4 percent in 2021.

Scenario 4: Deep crisis, recovery takes a long time

If the contact measures last not six months but a year, the economic woes will continue for longer. For a year and a half to be precise. The financial sector is in even bigger problems: some institutions need to be saved. Foreign governments are also in trouble, and we are indirectly affected.

In this darkest scenario, the Dutch economy will shrink by 7.3 percent in 2020; a slightly smaller contraction than the previous scenario, because companies have prepared for a longer bad period. But the shrinkage lasts longer. In 2021 there will be another 2.7 percent shrinkage.

Many people have a bad news conversation at work: in that year 9.4 percent are left unemployed at home.

Three scenarios worse than 2009

How do these scenarios relate to the crisis we had ten years ago? Let’s start with the bad news: in three of the four scenarios, the CPB foresees a larger contraction than in 2009. The economy shrank by 3.7 percent. Then we had two years of modest growth, then we dropped to two years of shrinkage, but that shrinkage was not nearly as great as in 2009.

Unemployment rose to 4.8 percent in 2009. And after that, the number of unemployed rose further to 8 percent in 2014. In scenarios 3 and 4 of the CPB, you have already reached such a figure in a short time.

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                                Nout Wellink, Jan Peter Balkenende and Wouter Bos announced in 2009 that Fortis Nederland has been nationalized.

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        <h2>Many differ from the previous crisis</h2>

“The big difference with the previous crisis is the abrupt stop,” says chief economist at ING Marieke Blom. Now some companies, in the catering or event industry, for example, suddenly have (almost) no income. “In 2009 it was more of a steady downturn. The depth of the fall is now stronger and faster than in 2009.”

But, and that’s the good news, the safety net is also bigger. Blom: “The policy response is a lot stronger. Both from the European Central Bank and from central government. Governments really have the feeling that we must respond to this now.”

From economy to banks?

The crisis that started in 2008 also originated in the financial sector and spread to the real economy. In this corona crisis, it remains to be seen whether banks will also get into trouble. This is not the case in two scenarios of the CPB.

Since the last recession, we have also set up all kinds of mechanisms in case things ever go wrong in the financial sector. That should now take blows if the crisis does indeed spill over to banks.

Cabinet policy will prevent unemployment

Unemployment figures are also not too bad for Blom. “In the third scenario, there will be an average of 300,000 extra unemployed in 2020. While we know that the sectors that are badly hit have about 1.5 million employees. CPB assumes that a large part of the employers will make use of the government regulation. ” In that case, a lot of layoffs are prevented.

In principle, the conclusion is: “The longer it takes and the more severe the measures, the greater the impact,” says Blom. For the time being, the blow is hard, but it can also get better soon. While the previous crisis dragged on for a long time.

Blom: “What do you prefer: a hard punch in your stomach or that someone turns your arm a little further for a long time? Compared to then, the cause is different, so it can spring up faster.”

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