News Rabobank
Corona and inflation slow economic growth in 2022
The new wave of corona infections and high inflation will slow economic growth in the coming year, Rabobank predicts. Previous estimates have been revised downwards. The Dutch economy is expected to grow by 4,5% this year. In 2022, economic growth is 2,9%, according to the forecast. High costs put pressure on margins in various sectors, including agriculture.
Rabobank published its quarterly publications on Wednesday 8 December. Inflation is expected to be 3,8% next year and 2,1% a year later. Inflation will probably fall sharply in the autumn of 2022. In many sectors, staff shortages are holding back growth. The Dutch economy seems to be increasingly able to adapt to the corona crisis, the economists say.
Inflation has soared in recent months. At 5,6%, inflation in November was the highest in forty years (year-on-year). Energy contributes 60% to this high inflation figure and Rabobank expects petrol, gas and electricity prices to remain high in the coming period. High commodity prices lead to rising food prices. Inflation is expected to fall sharply from the autumn of 2022, because the increase in energy costs at the end of 2021 will then be out of the figures. Rabobank does expect inflation to remain around 2% in the coming years.
The growth expectations of value added for the agricultural and horticultural sector are 1% in 2021 and 0% in 2022. In 2020 there was a contraction of 0,4%.
Food producer and retail can no longer absorb costs
Cost inflation in the food sector is too high to be fully absorbed by producers and supermarkets. Ultimately, consumers will experience rising food prices, according to Rabobank. This can mitigate the impact of higher food prices by choosing cheaper shops, products or restaurants and by paying more attention to offers, according to the bank.
Transaction data shows that private consumption growth (year-on-year) is already slowing down. A slight quarter-on-quarter contraction in private consumption of 0,5% is expected in the first quarter. For exports, the bank expects growth in the next two years, because the Netherlands' exports comprise a large share of business services (and a small share of tourism). Mechanical engineering carries a lot of weight in industrial exports and it is precisely this sector that benefits from increased global demand.
No wage-price spiral
The bank expects that wages will grow in 2021 and 2022, by 2,1% and 2,9%, but that wage growth will lag behind consumer price inflation. This results in a net loss of purchasing power, as long as the government does not compensate for this (via lower taxes and premiums). "We do not expect this loss to be largely recovered until 2023, with wage growth of 3,4% versus 2,1% inflation."
Rabobank does not expect a strong wage-price spiral, 'because inflation expectations (which guide the use of collective labor agreements by trade unions) have less and less traction on wages, partly due to the crumbling power of the trade unions'.
Pigs
Conditions for the pig sector are challenging. There is an oversupply of pork in Europe as a result of decreased exports to China. Margins are under considerable pressure due to the low selling prices and high feed costs. In addition, African swine fever continues to pose a serious threat, according to the bank.
Dairy farm
Farm milk prices are at an above-average level. A limited supply due to weather influences and higher feed costs are the main drivers for this. Other cost items also rise, so that the margin rises less quickly with the selling prices. The start of the growing season in Europe will be one of the important indicators in the coming six months for the development of milk supply and thus for the turnover development in 2022.
Veal calves
The tightened corona measures and an increasing supply will put more pressure on the market in the coming months. While space had been created in recent months due to wider openings in the European food service. As long as corona measures remain, supply management is crucial. This is also complex due to the long production cycle. In addition, feed prices will remain high for the time being due to an improving dairy market and the tight supply of raw materials for concentrates.
Linda van Eekeres
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