Rabobank: deep recession unavoidable

Rabobank assumes that, despite the unprecedented support measures from the national and European government, a deep recession cannot be prevented. Unemployment will rise sharply in the coming months.

Assuming that the corona-limiting measures will not be relaxed until June 1, the Dutch economy is expected to shrink by 5 percent this year.

Dual effect
The effect of the virus outbreak on the Dutch sectors is twofold. Initially, there is a direct effect from the virus outbreak itself and the measures aimed at reducing it, such as the mandatory closures and disrupted supply chains. Secondly, many sectors will also have to deal with lower demand as a result of a deteriorating economic environment at home and abroad.

This deteriorating economic situation is reflected, for example, in lower exports, higher unemployment and more negative sentiment. This picture will not pass the agricultural and horticultural sector, Rabobank expects.

The support measures from the government, banks and other parties will ease the pain, but not completely remove it. Many companies see their turnover fall and an increase in the number of bankruptcies is obvious. This also puts pressure on employment and household incomes.

Third quarter recovery
Rabobank expects a gradual recovery to start in the third quarter of 2020, assuming that the corona measures will not be relaxed until June 1. Consumers and businesses will still keep their hands on the purse strings. Out of uncertainty, or because their incomes and buffers have shrunk considerably as a result of the crisis. Moreover, the disruption in global value chains does not immediately boost factories. Rabobank therefore expects that it will take some time before the Dutch economy is back to the level it was before the corona crisis.

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