News Rabobank
Inflation leads to mild recession at the end of this year
The Netherlands is expected to experience a mild recession at the end of this year and early next year. The economy will probably grow again from the second quarter of 2023, Rabobank writes in a quarterly study published today (9 June). According to the bank, inflation remains the most important strategic theme in the Dutch food chain.
The Rabobank economists foresee a GDP growth of 2022% for the whole of 2,9 and a contraction of 2023% for 0,2. The main cause of the mild recession is high inflation, which is depressing spending and investment. In addition, at the end of this year, staff shortages and global supply chain disruptions are slowing growth in many Dutch sectors. Despite the slight economic downturn, Rabobank expects unemployment to rise only slightly.
In this forecast, Rabobank assumes a boycott of Russian oil by the EU from the end of the year, as a result of which energy prices will remain high or even rise. It is not assumed that Russian gas will enter the EU's sanctions packages, nor that Russia will turn off the gas tap. Also, any new corona measures are not taken into account. If such measures or a gas boycott are taken, the economic picture will have to be adjusted downwards, according to Rabobank.
Inflation main theme food chain
Inflation remains the most important strategic theme in the Dutch food chain. Martine Boon, deputy director of Food & Agri, says in a statement: "Margins are under pressure for entrepreneurs who cannot fully pass on the increased purchase prices. If companies are able to pass on inflation, it eventually ends up with the consumer. Many sectors will notice, such as retail and hospitality."
At the beginning of this year, supermarkets tried to slow down price increases for consumers. This was often at the expense of suppliers' margins. "Meanwhile, sentiment at the negotiating table seems to have shifted somewhat," the bankers note. "If food retailers do not accept price increases, they risk that they will not receive certain products. This contributes to a rapid further rise in consumer price inflation."
It is already visible that consumers are buying more offers and private labels in supermarkets. Rabobank also expects that hard discounters gain market share from full servicesupermarkets and the demand for more comes premiumproducts and services, such as those from restaurants and specialty shops. "We therefore expect a plus in turnover for the food industry due to rising prices, but pressure on margins and volumes due to rising costs and a price-conscious consumer."
Rising costs of agriculture
No growth in added value is expected for the agricultural sector this year and a slight contraction of 0,6% next year. In agriculture, expensive inputs cause rising costs.
In pig farming, there is more than enough supply to meet the demand, and that creates pressure on prices. In addition, the costs for feed and energy have been high for some time. However, Rabobank expects a recovery as a result of declining production in various EU countries, including Germany.
Dairy farming has a relatively high price level. The worldwide limited supply ensures a milk price that is 30% above last year's level. However, the costs are also rising due to higher feed and diesel prices. The Rabobank economists expect a relatively stable picture for the coming months. "A new period of derogation is currently being negotiated with the EU. If this does not go ahead, this will have a negative effect on the return on Dutch dairy farming through increased fertilizer purchase, feed purchase and manure disposal."
The turnover forecast for arable farming is 20% this year and 0% next year (see table). For land-based livestock farming, this will be 35% in 2022, but a 10% decline in turnover is expected for next year. In other livestock farming, turnover growth of 5% is expected in both years.
Linda van Eekeres
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