“Expected growth of the Dutch economy in 2022”

The Dutch economy is expected to grow by 3.6% in 2022 by ING Research, after a growth of 4.4% in 2021. This means that the economy will be 4.1% larger in 2022 on average than in 2019 and the Netherlands will be the most economic effects of the corona crisis relatively quickly. Dutch GDP already reached pre-coronavirus levels in the third quarter of 2021, in contrast to that of the four largest economies in the eurozone. Nevertheless, the Netherlands also has catching up potential: the pick-up in service consumption and service exports in particular is expected to contribute to the high GDP growth figure of 2022. However, the uncertainties surrounding the corona virus do pose an increased risk to the economy.

Brake on growth rate due to coronavirus revival
At the end of 2021 and early 2022, the revival of the corona virus and contact-limiting measures will slow down the Dutch growth rate. The Netherlands cannot escape the worldwide supply problems as a result of previous factory closures and bottlenecks in maritime logistics. As these barriers diminish in the course of 2022, economic growth in our country will increase again. Partly due to increased contact restrictions, economic growth is expected to fall to 0.1% quarter-on-quarter in the fourth quarter, with the size of the economy reaching 101.7% from before corona. The resurgence of the coronavirus and possible further aggravation of it increases economic uncertainty. This is the main risk in growth expectations, especially with the development of new variants of the virus,” said Marcel Klok, macro-economist at ING Research.

New year starts with weakened economic recovery
In 2022, ING Research expects the economy to be 4.1% above 2019 levels, due to an annual growth of 3.6% compared to 2021. Most industries will be larger in 2022 than before corona (in 2019). This does not apply to the badly affected catering, aviation and travel industry. Growth will still be moderate in the first quarter. After that, the scaling up of mainstream care, the gradual reduction of problems in the global supply chain and the waning impact of the coronavirus will help accelerate the pace of growth. Later in the year, the scarcity of personnel in particular is a brake on growth.

Tight labor market main obstacle, unemployment to 2.9%
The Dutch labor market continues to struggle with a shortage of personnel. This is confirmed by the fact that labor shortage is most often cited by non-financial companies as the main barrier to production. This share of companies is even slightly higher than before the corona crisis. This is despite the fact that never before so many people in the Netherlands are willing to work and are never so much at work as in recent months. The scarcity of personnel forces employers to increase wages. ING Research estimates the collective labor agreement wage increase for 2022 at 2.4%. Unemployment is expected to fall from an average of 3.3% in 2021 to an average of 3.2% in 2022, to 2.9% in 2023. This conceals a temporary, small increase during 2022, after support measures have ended. This is the result of a slight increase in the expected number of bankruptcies and business closures.

Real household income remains virtually unchanged due to inflation
In combination with persistently high inflation, the accelerated rise in collectively negotiated wages means that the real income of the average working household in 2022 will be approximately comparable to that in 2021. The consumer price increase is expected to be 2.7%.

Dutch business mainly fears the supplier impact of corona
Even without the recent revival of the virus, corona will still have an effect on Dutch business in the coming period. Supplier problems are the most feared impact of corona before 2022, according to the Dutch Business Survey. Remarkably, companies mention this even more often than the lockdown measures.

The fear of a continuation of these problems is particularly prevalent in construction, industry, oil & gas, trade and agriculture. The basis for these problems lies, among other things, in the global logistics sector, especially in container transport via water. Lockdowns meant that ports did not work or did their job at a low level and there were greater shortages of personnel such as truck drivers. This resulted in a mismatch between ports with too few containers and ports with too many containers, long waiting times and high transport costs. The result was a shortage of production resources, which meant that scaling up in industry took longer. This while the demand for goods was extra high, because of the substitution of less available service consumption for goods consumption (purchased online).

The culture, sports & recreation, catering, real estate and transport & storage sectors give a different signal. They see new contact-limiting measures as the biggest fear of corona for 2022. Marcel Klok: ”Both difficult delivery and contact restrictions inhibit economic growth in the short term. However, it is extremely uncertain how big the impact will be.”

Exports rise to almost 7% above pre-corona level, despite supply difficulties
Dutch exports are expected to rise to an average of 1.4% above the level of 2019. In 2022, exports will be 6.7% above that level, according to ING Research’s basic estimate. Actual export growth will initially be held in check by supply difficulties, while services exports will temporarily be more affected by the corona virus. Sales to the euro area, our most important sales area, in particular, are facing these challenges.

Services hindered for a while, but then fulfill a lot of recovery potential
In a period dominated by corona, providing services is extra difficult, as it requires direct contact and the possibility to travel. In the third quarter of 2021, services exports were still more than 9% lower than at the end of 2019. The recovery will initially be slow in the coming period and is not expected to gain any significant momentum until 2022. It is also probably not yet complete: ING Research expects services exports to be about 4.6% lower in 2022 than in 2019. Especially the exports of aviation services, such as the transport of foreign travelers, may take longer to complete. to return to the old level. However, it is expected that services will ultimately be the biggest driver behind export growth.

Delivery problems slow down investments

Companies expect to invest more in 2022. Investments are expected to increase by ING Research in 2022 to just 0.4% below pre-corona levels. For the end of 2021 and the beginning of 2022, ING Research assumes that, although the demand for end products appears to be sufficiently present for the time being, the lack of availability of investment goods may depress investment figures. Means of transport in particular are delivered less or delayed, mainly due to shortages of crucial components such as chips. By 2022, these supply challenges are likely to diminish and investment will again be dominated over time by the growth rate of demand rather than by the capacity constraints on the supply side. Investments are therefore expected to slow down for a while in the short term, but will pick up again later in 2022. ING Research estimates 1.3% growth for the year 2022, after an increase of 2.5% in 2021.

Consumption recovery also temporarily slowed down, but fully in 2022
Household consumption is expected to be 1.3% higher in 2022 than in 2021, while on average it will still be 3.6% behind the level of a year earlier in 2021. ING Research foresees a flat development in the quarters around the turn of the year and a stronger rebound in the remainder of 2022. In the short term, however, expectations are moderate. Consumer confidence fell sharply in November. Not only are consumers more negative about the economic climate and their financial situation, their willingness to buy has also declined. The drop in sentiment may be related to the seepage of higher wholesale gas and electricity prices into consumer energy bills, the new coronavirus revival and additional contact-limiting measures. Although ING data on the value of debit card, iDEAL and cash withdrawal transactions suggest that the fourth quarter of 2021 started with a good month for consumption, we assume a fairly flat picture at the end of 2021. After the reintroduction of the mask requirement , the wider application of the corona pass and the earlier closure of entertainment venues, we see a decrease in debit card payments at service providers in November. Initially, this seems to be largely offset by additional online purchases.

Real income development around zero
In 2022, incomes will hardly provide an impulse for consumption. Increased tightness in the labor market is accelerating the nominal collective labor agreement wage increase to approximately 2.4%. However, because inflation is expected to be close to this and the development of policy costs will not change significantly before 2022, real income developments will be around zero. In 2023, the balance will probably be more favorable for workers.

Recovery of services, spending from corona savings and rebounding sentiment are defining for 2022
The consumption development of 2022 will therefore be determined to a large extent by the remaining recovery in the consumption of services, the spending of the corona savings and the pick-up in the willingness to buy. All in all, households are expected to consume 5.1% more in 2022 than in 2021. The main upside risk in the consumption estimate is that households with a lot of savings could positively surprise with extra spending, while the corona virus still poses the greatest downside risk. Government consumption will also be higher in 2022 than in 2021. For example, more will be spent on eliminating learning disadvantages via the National Education, Health Care, Defense and Security Program

Consumer price inflation will remain high in 2022, but will decline over the course of the year
ING Research expects the increase in the national consumer price index (CPI) of 2.7% in 2022 to be at a comparable level to 2021. This relatively high currency depreciation is mainly due to higher prices of gas, electricity and fuel. The rising costs of housing, food and the normalization of prices for clothing and airline tickets also contribute to this inflation figure. Inflation is high in the first quarter, declines in the second and third quarters and dips below 2% in the fourth quarter, mainly due to the strong impact of energy and fuel prices.

Although the impact of higher energy prices is dampened throughout the year by lowering energy taxes, the impact of energy and fuel with a contribution of 0.7 percentage points is still significant in 2022. Rent increases have been policy frozen from July 2021; For example, the expected rent increases from July 2022 will ensure that housing services will still contribute appreciably (0.4%-point) to inflation in 2022. We see a comparable (smaller) effect from tuition fees. For many students, these have been halved for the 2021-2022 school year. Normalization to usual amounts for the 2022-2023 school year will lead to an upward effect on inflation. Increased world food prices are expected to translate into a food contribution of 0.2 percentage points in 2022, while the base effects of clothing and airline tickets are also responsible for several tenths of a percentage point of the increase in the CPI.

Source: ING

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