The Netherlands’ economy rebounds to 3% below pre-crisis peak

The Dutch economy became 7.7% larger compared to the second quarter of 2020 but was still 3.0% below the peak in GDP of 4Q19. While this performance is better than that of many other eurozone economies, it still means that the Dutch economy was operating only at 97% of its output of 4Q19; it hasn't yet managed to recover fully. This relatively favourable GDP performance, which might speculatively be related to a combination of the comparatively looser “intelligent lockdown” during the first wave of the virus, to the size and effectiveness of the fiscal support policies and to a favourable sector composition (tourism is relatively small), has not translated into a superior labour market outcome. The unemployment rate actually rose more than in many other eurozone economies.

As in other countries, the high growth rate quarter-on-quarter was mostly a mechanical rebound that resulted from the unwinding of the lockdown in March-May. It turned out more favourable than anticipated. Consumption and exports particularly contributed most to growth compared to the second quarter, with respectively 9.4% and 8.6% growth quarter-on-quarter. Gross investment was up as well, although more modestly (6.3%). Government consumption expanded by 6.3%, shooting 1.6% above the level of 4Q

Household consumption did particularly well in terms of growth. Recent monthly figures for households' domestic consumption show that service consumption rebounded until September to a level of 8% below the pre-Covid peak, while goods' consumption reached levels even higher than before the crisis. Since consumer confidence is low, substitution must be part of the explanation: households used part of their foregone spending on holidays and recreation to buy more goods such as electronics and supplies from the hardware store. A similar pattern emerges from the export figures: while service exports increased modestly by 3.4% compared to 2Q20 to 11% below the level of 4Q19, Dutch goods exports rebounded by 10.4% to only 2.1% below the level of 4Q19.