Netherlands: Activity declines in Q4
February 16, 2021
The economy contracted 0.1% on a seasonally-adjusted quarter-on-quarter basis in the fourth quarter of 2020. This contrasted the third quarter's historic 7.8% increase after the economy shrank at the steepest rate on record in Q2 due to the impact of the global health crisis.
The quarterly downturn was driven by a drop in private consumption (Q4: -1.4% qoq) that contrasted the jump in the prior quarter (Q3: +8.9% qoq). Similarly, public consumption declined after expanding in the third quarter (Q4: -0.1% qoq; Q3: +7.2% qoq). Meanwhile, fixed investment continued to grow, albeit at a much-reduced pace (Q4: +1.8% qoq; Q3: +7.2% qoq), softening the overall contraction in the quarter.
On the external front, exports of goods and services grew a softer 1.0% quarter-on-quarter in the fourth quarter, down from the 7.3% increase logged in the third, as many economies saw Covid-19-related restrictions reintroduced. Imports of goods and services also expanded at a softer pace in the quarter (Q4: +1.1% qoq; Q3: +6.7% qoq).
On an annual basis, GDP contracted 2.9% in Q4 from the previous quarter's 2.5% decrease.
Looking at last year as whole, the economy shrank at the steepest pace since at least the Second World War due to the impact of the Covid-19 pandemic, with restrictions hammering household and capital spending as well as trade. Turning to this year, the economy is forecast to return to growth as economies are gradually reopened amid the rollout of vaccine programs. Domestic and foreign demand are expected to firm as a result. However, downside risks persist due to lingering uncertainty over the pandemic, the vaccine rollout and trade relations with the UK. Moreover, growth will be partly flattered by a supportive base effect.
Marcel Klok, senior economist at ING, commented:
“With more than three thousand cases per day as of mid-February 2021, the virus is far from contained. The lockdown continues until 2 March, which implies that first-quarter GDP is likely to worse than the 4Q figure. With such a rough start to the year, GDP won’t be able to recover to its 2019 level in 2021, despite a strong rebound in the remainder of 2021 once life returns to some semblance of normality and social distancing measures are eased. However, we maintain our base case scenario that the recovery out of this crisis will be substantially faster than the global financial crisis. It is helpful that a public support package with projected net spending of €28billion (3.4% GDP) has been announced for 2021.”
Author: Jan Lammersen, Economist