07:58 War in Ukraine could push the Netherlands into recession this year

The Dutch economy could end up in a short recession this year if the war in Ukraine not only leads to higher energy prices, but also to a decline in world trade and investment. The Central Planning Bureau (CPB) presents this scenario alongside last week’s forecasts for the impact of inflation on the economy and purchasing power.

According to the CPB, there is now, as at the start of the corona crisis, a high degree of uncertainty about what the war will mean for the economy. “A constant threat creates uncertainty, which in turn affects the demand for goods and services,” explains Diederik Dicou, industry manager at the CPB.

“As with the start of the corona pandemic, there is now fundamental uncertainty coming from outside the economy.”

The additional scenario that the CPB is developing should not replace the basic forecast. “It’s not the worst case either, because other scenarios are possible.” If Russia’s oil and gas supplies are drastically reduced, the economic outlook will be much worse. “In such a scenario, the economy will probably be hit even harder.”

In the picture released today, the CPB assumes that the war will eventually lead to higher energy and commodity prices. “This has consequences for world trade, which influences demand and therefore also for the Netherlands as a trading nation,” says Dicou. “Consumers and companies in the Netherlands will also be more careful in the future and spend less money.”

Together, this leads to several quarters of contraction in the economy. On an annual basis, it would still be an increase of 1.9%, but no growth is expected before 2023. “If we’re still growing this year, it’s because we started the year off right.”

Source: NU

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