Effect of six months of the corona crisis on the economy: ‘It seems quiet before the storm’

What is the impact of six months of corona measures on the economy? We spend more than during the trough of the crisis, but less than during the summer holidays. Unemployment is also rising, but more slowly than before, and fewer and fewer companies are making use of the support package.

“It looks like we are on a plateau,” says Marieke Blom, chief economist at ING. “It feels like silence before the storm,” says Laura van Geest, CEO of the Netherlands Authority for the Financial Markets (AFM).

How much are we spending?

“Instead of holidays, people have spent money here, you can see that in the debit card transactions,” says Blom. “But since the end of August, when we went back to work, that has gone back. We are now spending a total of 6% less money than is usual in this day and age. That is a huge shift

Heres how it goes with spending money, saving and house prices:

According to Blom, the fact that we are spending less is only partly due to the fact that we are consciously keeping our hand on the cut. “We are spending a lot of stuff and food again, close to what you would expect in this day and age

What we are spending less on are trips and the hospitality industry. “That is not as much as it used to be and people may not dare to do it. That seems to be the main cause

As can be seen in the pictures above, since the corona crisis the Dutch think it makes more sense to save money and we did the same, especially during the lockdown. But in July we already saved a lot less. According to Blom this shows that the saving was not so much due to fear of harsh economic times. “Remember also that house prices are still rising. People often dont really start saving until their house becomes worth less”

“What was typical for the past month is that the number of infections is increasing again and it seems that the vaccine can take a little longer to get back to work”, says Laura van Geest of the AFM.

“That also nuances the idea that everyone can be vaccinated the day after tomorrow and that the problem will then be gone. The longer it takes, the greater the impact on the economy

Despite this, the impact on the labour market this month has been less dramatic than last month.

See what happened on the labour market below:

Unemployment is expected to rise even further. Blom: “I think we are at the stage where people often think: unemployment is rising, but I am not going to be unemployed. That is true for the vast majority of people, but not for everyone”

According to Blom, this can be seen, for example, in Google searches. “The week after the coronation measures were announced, many people searched for the term WW benefit. Not anymore.”

The fact that unemployment does not continue to rise hard is also due to the support package. Some 1.3 million workers are now being kept on with government support. Their salaries are paid via a subsidy, the NOW scheme.

See how many entrepreneurs are still using the governments support packages

The support package has also been extended for another nine months. Although some cutbacks have been made. “Its an art of steering the cabinet,” says Van Geest. “You cant subsidise companies forever, but you also dont want to let them fall over too quickly

Broadly speaking, the government package does what it has to do, she says. “First the blow has been dealt. And now that its taking longer, the government is adjusting the dimensions. The support is becoming more and more targeted”

The fact that many companies are being kept afloat by the support measures is also shown by the bankruptcy figures: fewer companies have gone bankrupt than last year, when the economy was still going very well. This means that companies that would probably have gone bankrupt without a corona are now also being kept afloat by the aid package.

Rather too many than too few, says Blom. “The amounts spent by the cabinet at the moment are manageable. And if you continue to give support then you havent broken everything you need later on, with all the human pain that entails”

See here how hard the economic blow was, how many companies went bankrupt and how some severely affected sectors were hit:

All in all, Van Geest has an uncanny feeling about the state of the economy now. “Much is not yet visible either. With special management it is not yet full, for example” This is a department at banks for people and companies who are unable to pay their bills.

“Thats partly because of the support package, and because companies are often still able to broadcast it with buffers. But what will happen in the autumn when the virus may come back to life? The longer we are in the other half-metre society, the more companies start to wonder whether they want to carry on or pull the plug anyway”

Then more people lose their jobs. “People who dont have enough money for necessary spending are going to buy things in instalments or stop paying their bills Recent research by the Netherlands Bureau for Economic Policy Analysis and the AFM showed that 73,000 households get into trouble when their income drops.

Banks are also preparing for a greater influx of special management services, according to talks that the AFM, as supervisor, is holding with banks. “They are taking on extra people there, for example,” says Van Geest.

Blom also thinks that the blows will come. “The labour market is always reacting a little slower, the housing market is lagging behind. Were going to see those dominoes fall at some point. How hard they fall, that is the question”