CPB Director Pieter Hasekamp: ‘The second corona wave does not lead to a fundamentally different economic outlook for 2021. However, certain sectors, such as the hospitality industry, culture and tourism, will once again be severely affected by new physical contact restrictions. The government's generic support policy (NOW, TOZO) is keeping pace with economic development. From the perspective of economic stabilisation, therefore, there is no reason to reconsider the phasing out of this support policy. Nevertheless, there may be other reasons for accommodating affected sectors; such support preferably should be temporary and targeted.’

Economic recovery very strongly depends on how the pandemic will develop. To do justice to this uncertainty, CPB also added a 'start–stop scenario' to its projections that includes new corona waves and insufficiently available or effective vaccines. Under such a scenario, the economy will contract by slightly less than 1% in 2021 and unemployment will increase to more than 8% by the end of 2021.

The corona recession will have a negative impact on wage growth in 2021 and therefore also on any increase in purchasing power. Wage increases under collective labour agreements (CAOs) will decline, from 2.5% in 2020 to 1.4% in 2021. As a result of reductions in the financial burden, purchasing power will still increase by 1.0%, although this is lower than the 2.2% of 2020. These static purchasing power figures do not include the fact that layoffs and lost revenues for self-employed independents cause strong income losses for large numbers of people and that the government has been carrying part of the wage costs.

Economic recovery and the phase-out of financial support measures halfway through the year will lead to a decrease in government deficit in 2021. The projected deficit is 4.6% of GDP in 2021, which is 1.5% below that of 2020. This will also lead to a substantial softening of the increase  in the debt ratio.  

Corona dampens growth in productivity and labour supply in the medium term

In addition to the November projections, CPB also published an update on the medium-term outlook (MLT), today. The MLT provides an outlook through to 2022–2025 and forms the basis for the analysis of the election manifestos. The economy is projected to gradually recover from the corona recession. The corona outbreak is leading to a 4% lower GDP level by 2025 than was projected in the MLT of March, which not yet included a coronavirus impact. In 2022–2025, annual GDP growth will be 1.5%; there will be no increase in static purchasing power during this period. Unemployment will gradually decline to 4.5% by 2025. Assuming no changes in policy, the government deficit will decrease to 1.2% of GDP by 2025. The corona outbreak will worsen the sustainability balance, which provides an indication of the extent to which the financial burden will be shifted to future generations. According to the current projections, the sustainability gap is 2.4% of GDP.

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