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Recession is unavoidable, the only question is how deep it will be

Depending on the scenario EU may plunge from 1,2 percent to 10 percent

26.Mar.20 11:09 AM
By Shawn Highstraw


Recession is unavoidable, the only question is how deep it will be
The corona crisis will pull the Netherlands and the rest of Europe into a recession and, despite all the measures taken, will lead to more unemployment. Everything depends on the duration of the corona restrictions and how deeply all this affects the economy, the Central Planning Bureau (CPB) reports based on initial calculations of the corona crisis.

In the lightest scenario, with three months of restrictions, the economy will shrink by 1.2 percent this year and unemployment will rise slightly to 4 percent. The economy will renew its growth again next year.

If the restrictions last for six months or more, the economy will be hit harder. In that case, the economy will shrink to 7.7 percent this year, with a slight recovery next year. Unemployment rises to 8 percent. Such a contraction of the economy amounts to a loss of 60 billion euros.

If the corona crisis and restrictions continue for a year, the economy will shrink by 10 percent this year and next. Unemployment will then rise to more than 9 percent.

During the last major recession, in 2009, the contraction of the economy amounted to 3.7 percent, an economic loss of 22 billion euros.

"Corona is a health crisis," said CPB director Hasekamp. "The measures to curb the spread of the virus are necessary, but it is clear that they are deeply involved in the economy. These kinds of measures have never been seen before."

Unemployment rises the longer the restrictions and the support measures do not stop them. "Government policy is aimed at limiting redundancies and bankruptcies, but the impact can at most be partly absorbed. If the crisis lasts longer, the economic damage will be greater."

Unemployment currently stands at 2.9 percent, with 274,000 unemployed. In the worst scenario, there will be 850,000 unemployed by 2021. At one point, in February 2014, there were 699,000 unemployed in the latest recession.

Public finances deteriorate sharply due to all measures and consequences. However, the national debt does not come directly into the danger zone, says the CPB. In the worst scenario, the debt will reach 73.6 percent by the end of 2021.

"There are rough times ahead," said Minister Wiebes of Economic Affairs. "It means pushing ahead with the implementation of the emergency package for jobs and the economy and looking for ways for business to continue as much as possible. Because everyone knows this is going to hurt."

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