The Dutch economy slowed down by 1.7% qoq in the first quarter of 2020 – more or less as we had expected. The decline clearly was smaller than the average contraction in the eurozone.
Most pronounced decline in consumption and exports
Based on highly provisional figures, Dutch gross domestic product (GDP) shrank by 1.7% on a qoq basis. This drop was mainly attributable to the decline in consumption and exports. Statistics Netherlands (CBS) has stressed that the figures presented today are even more uncertain than usual due to a lack of available information, particularly about last March. That is why some figures are estimates. Other European statistical agencies are facing the same problem.
The plunge in household consumption did not come as a surprise after many businesses and establishments were forced to close their doors in mid-March. Government consumption and investment were down as well. One bright spot was the buoyancy in housing investment after several quarters of decline. The drop in total investment was mainly due to significantly lower spending on vehicles. Ahead of tax measures that were set to take effect early in 2020, car sales had accelerated significantly in the fourth quarter of 2019.
Both imports and exports saw a sizeable drop (qoq). But given that exports fell at a lower rate than imports, net exports (exports minus imports) did not cause GDP to shrink any further.
More economic contraction on the cards
The effects of the corona crisis did not manifest themselves until the second half of March. For this reason, the average fall in GDP was not too bad in the first quarter. The second quarter will be much worse, since it took until 11 May for a number of restrictive measures to be relaxed, with more restrictions scheduled to be lifted in June. This will likely be followed by further gradual easing in the third quarter. Despite the lifting of restrictions, social distancing slows down growth recovery. All in all, the Dutch economy is in for a significant contraction this year.