RaboResearch - Economic Research

Dit artikel is ook beschikbaar in het Nederlands

New corona wave and high inflation dampen economic growth in 2022

Economic Quarterly Report

  • We expect the Dutch economy to grow by 4.5 percent in 2021. Particularly in the second and third quarter of 2021, economic growth was stronger than expected.
  • In contrast, we expect growth of 2.9 percent in 2022, lower than previously projected. This is due to stricter corona measures and higher than expected inflation.
  • In our projections, inflation is 3.8 percent in 2022 and 2.1 percent in 2023. Inflation is expected to fall sharply from the autumn of 2022 onwards.
  • The latest variant of the coronavirus originating in southern Africa (Omikron variant) increases the risk of further economic setbacks
  • In a downside risk scenario with stricter measures, we expect Dutch economic growth to slow further and reach 2.6 percent in 2022.

Economic outlook

The Dutch economy has gained considerable momentum in recent quarters. CBS has revised economic growth in the second quarter upwards to 3.8 percent (quarter-on-quarter growth; QoQ), and growth in the third quarter was also strong at 1.9 percent (see Figure 1). As a result, the economic growth in our forecast for 2021 is 4.5 percent – slightly higher than our earlier forecast of 4.2 percent.

Table 1: Economic expectations for the Netherlands
Table 1: Economic expectations for the NetherlandsSource: RaboResearch

By contrast, we have revised our estimate of economic growth for 2022 sharply downwards to 2.9 percent (previously 3.7 percent). The stricter measures resulting from the recent upsurge in the coronavirus (see Figure 2) are expected to dampen economic activity in the near future. Added to this are the effects of much higher than expected consumer price inflation. We will discuss this in more detail later in this Quarterly Report.

In our projections, we have therefore lowered economic growth in the fourth quarter of 2021 to 0.2 percent (was 1.1 percent) and expect a slight contraction of 0.2 percent in the first quarter of 2022 (was growth of 0.5 percent). In the remaining quarters of 2022, we expect the economy to grow at its traditional pace (see Figure 1). Looking further ahead, we forecast growth of 1.7 percent in 2023. Although growth will be 'as usual', the size of the economy will be smaller than we would have expected without a coronal pandemic (compare light blue and dark blue lines in Figure 1).

Figure 1: More economic headwinds expected in the coming period
Figure 1: More economic headwinds expected in the coming period Source: RaboResearch, CBS
Figure 2: Substantially higher number of infections and IC admissions
Figure 2: Substantially higher number of infections and IC admissions Source: European Centre for Disease Prevention & Control, RIVM

Economy adapts

Despite these setbacks, we have not revised our estimates for 2022 downwards very much, because the Dutch economy is (just as other economies) increasingly able to adapt to the corona crisis. People are getting used to working from home, having food delivered to their homes instead of eating out, and ordering items from online stores. There are also entrepreneurs who adjust their activities in response to the new corona reality. This habituation is also reflected in the figures. In 2020, an increase of 10 points on the so-called stringency index.[1] caused the Dutch economy to shrink by 1.5 percentage points (see Figure 3). In 2021, this will be just 0.4 percentage points.

Figure 3: Lockdown measures have less impact on economies
Figure 3: Lockdown measures have less impact on economiesNote: quarterly data for 27 countries. Source: Oxford University, OECD, World Bank, RaboResearch.

Box 1: A risk scenario for the Netherlands: a new lockdown

In our baseline estimate, the current measures (announced on 26 November) remain in place for the rest of this year and the first quarter of 2022. While this is already more cautious than the government officially communicates (duration of three weeks), it is also possible that it will actually tighten the measures further. Possible reasons for this are that the current measures have less effect than expected or that the Omikron variant is much more contagious than the current dominant Delta variant.

In this risk scenario, we assume that on 14 December the government will declare a lockdown of the same severity as in the winter of 2020/2021. This means, among other things, that schools, childcare facilities, museums, theatres, cinemas, amusement parks, contact professions, non-essential shops and restaurants will be closed (pick-up and delivery will be possible). The same advice applies again to domestic and international travel and group size (at home and away). These measures become slightly lighter during the first quarter of 2022, but remain largely in place during the quarter. Thereafter, they will be rapidly phased out.

While the current measures only hit certain sectors hard, this lockdown does have clear negative macroeconomic effects. The table below shows that GDP growth in the first quarter of 2022 falls from -0.2 percent to -1.0 percent. The second and third quarters show a strong recovery, reducing the impact on annual growth in 2022 to -0.3 percentage point. In 2023, growth will be slightly higher. The lockdowns mainly affect private consumption and to a lesser extent business investments.

These effects are much smaller than in the first lockdown in spring 2020, while the measures are actually heavier. There are several explanations for this. First, international trade is largely maintained because (unlike in 2020) not all our major trading partners (e.g. the US) have similar lockdowns. Second, businesses and consumers are adapting much faster than they did before, because they have become accustomed to it. Also, the uncertainty about the near future is much smaller.

This scenario does not take into account larger shocks, such as a much more pathogenic Omicron variant or large-scale global lockdowns. In that case, lockdowns in the Netherlands would be even longer or more severe and exports would be hit much harder than in this risk scenario. 

Heterogeneity and support

There is of course a lot of dynamism hidden under the relatively smooth macro picture. For example, the stricter corona measures have again hit the hospitality industry, events sector, recreation and culture, and sports associations particularly hard (for more information, see our Sector Forecasts). The caretaker cabinet has therefore revived the NOW scheme until the end of the year, which allows entrepreneurs who experience a decrease in turnover of at least 20 percent due to the corona measures, to receive 85 percent compensation for the wage costs of their personnel. The fixed costs allowance (TVL) has also been extended and the tax deferral extended. Thanks to this new support package, the expectation is that a major bankruptcy wave will be avoided, that the income of many Dutch people will be maintained and that unemployment will remain historically low.

Private consumption

Our transaction data show that the growth of private consumption (year-on-year) has already started to ease recently (see Figure 4). Further restrictions on opening hours on 28 November, and sharply higher inflation will likely put further pressure on private consumption in the coming period, and we even expect a slight contraction of 0.5 percent (QoQ) in 2022Q1.

Figure 4: Transaction data show weakening of private spending
Figure 4: Transaction data show weakening of private spendingSource: Oxford University, CBS, RaboResearch
Figure 5: Rapid recovery of Dutch imports and exports
Figure 5: Rapid recovery of Dutch imports and exports Source: CBS, RaboResearch

Trade recovers

After a sharp contraction in 2020, Dutch exports recovered well in 2021. We also expect continued growth in 2022 and 2023 (Figure 5). Although exports are sensitive to changes in foreign demand, they are less sensitive than other countries to the corona related restrictions and disrupted supply chains. This is because Dutch exports include a large share of business services and a small share of tourism. Industrial exports are dominated by the mechanical engineering sector, which benefits from increased global demand.

Long-term investments under pressure

Corporate investments will grow only modestly in 2021. This will by no means make up for the contraction in 2020. The long-term damage will be concentrated in the category of transport equipment (see Figure 6). Many other types of investment are already above the pre-pandemic level.

We expect a slight contraction of 0.6 percent in 2022 and very limited growth in 2023. Although the severe labor shortage calls for productivity-enhancing investments and business confidence is currently positive again (Figure 7), uncertainty and a deteriorating financial position for entrepreneurs (as a result of the lockdown measures and increased purchasing costs) could be a reason to postpone or scale down investments.

Figure 6: Development of investments compared to 2019 by type
Figure 6: Development of investments compared to 2019 by typeSource: CBS, RaboResearch calculations
Figure 7: Business confidence and business investments
Figure 7: Business confidence and business investments Source: CBS

The growth of residential investment (new-builds and renovations) will also come under pressure in 2022 (-1.7 percent). On the one hand, this is because we expect a slight decline in the number of house sales in 2022 (see our Quarterly Report on the Housing Market for developments in the housing market, in Dutch), which means that there will also be less renovation work. On the other hand, global disruptions in logistics chains are causing problems in the supply of materials. Combined with staff shortages in the construction industry, this is further dampening residential investment.

Inflation Highest in Forty Years

Figure 8: Energy contributes 60 percent to sharp rise in inflation
Figure 8: Energy contributes 60 percent to sharp rise in inflationSource: CBS, RaboResearch

Inflation, i.e. the increase in the average price level, has risen sharply in recent months. At 5.9 percent (year-on-year), November's inflation rate was the highest in forty years (see Figure 8).

Energy prices determine inflation picture

Energy contributed 60 percent to the high inflation rate in November and gasoline, gas and electricity prices are expected to remain high in the coming period. This particularly affects households with high energy consumption (at variable rates) and a private car. We illustrate this with a fictitious example of two different households with an equal budget, but a different expenditure pattern (see Box 2).

In addition, energy companies expect to raise their tariffs further in 2022 by between EUR 200 and EUR 300 on an annual basis. This price increase will affect a large group of households: between 40 and 50 percent of households have a variable tariff. It is important to note, however, that this price increase already takes into account the government's concession of a  EUR 400 reduction in the energy tax per household. Otherwise the increase for the largest supplier, Essent, for example, would amount to an additional EUR 660 per year. This is in line with RaboResearch's earlier estimate of an extra EUR 600 per year following the very sharp increase in gas prices.

A complicating factor in estimating the further course of inflation for next year is that it is not yet clear how Statistics Netherlands incorporates the discount on the energy bill into the inflation figures. If CBS attributes the discount directly to a reduction in energy prices, this partly camouflages the actual development. 

Box 2: Everyone's own inflation

The official inflation rate is based on an average spending pattern. In practice, the impact differs per household, depending on their personal situation. We illustrate this with a fictitious example of two different households with an equal budget of EUR 3,300. The first household has its own car and a variable energy contract, and as a result of the price increases it will pay a total of EUR 196.10 more, or a 'personal inflation rate' of 5.9 percent. The second household does not have its own car and has a fixed energy tariff, making the cost increase for this household EUR 69.83 (2.1 percent), which is below average.

 * The October figure for restaurants and hotels is used for this product group. Source: CBS, RaboResearch

Inflation expectations

We expect inflation to be 2.7 percent in 2021 and 3.8 percent in 2022. It will fall sharply during the autumn of 2022, as the increase in the cost of energy (oil, gas and electricity) at the end of 2021 will then be absorbed. However, we do expect high commodity prices to lead to higher food prices in the coming quarters.

Although we have seen inflation drop from its peak over the past two decades, we expect it to hover around 2 percent in the coming years. This is mainly because energy prices are expected to remain high. Despite a sharp correction in oil prices in November and recent announcements by OPEC+ to follow up on planned production increases in the new year, not much has changed in the underlying fundamentals under the oil market. Against the backdrop of the energy transition and the low oil price, the US has invested relatively little in shale oil extraction in particular in recent years, and we expect strong demand for oil and a price of around USD 80 per barrel in 2022.

The demand for gas is also expected to remain high, because it fulfils an important bridging function as the least polluting fossil fuel in order to be able to absorb peak moments in electricity use.

In addition, persistently high raw material prices, the ongoing disruption of international logistics chains and the scarcity of semi-finished products (such as semiconductors) mean that we do not expect strong deflationary developments in product prices. Whereas in the past high raw material prices were followed by a sharp drop in prices, this does not seem to be the case now.

Risk of a wage-price spiral?

The question is whether higher temporary cost inflation also feeds into higher inflation expectations, which, through higher wage demands, could possibly facilitate a wage-price spiral. This could make us relive old times of prolonged high inflation, such as in the 1980s or at the beginning of this century.

Figure 9: Expected inflation in 2022 of 3.8 percent
Figure 9: Expected inflation in 2022 of 3.8 percentNote: There is a slight difference between the harmonised consumer price index (HICP) and the consumer price index (CPI). Source: RaboResearch, CBS
Figure 10: Wages do not offset loss of purchasing power until 2023
Figure 10: Wages do not offset loss of purchasing power until 2023Explanation: Wages are the collective wage agreement wages per hour plus incidental remuneration. Source: RaboResearch, CBS

Although wages are expected to grow by 2.1 and 2.9 percent in 2021 and 2022, respectively, they will lag behind consumer price inflation. This will result in a net loss of purchasing power for households, as long as the government does not compensate for this through lower taxes and premiums. We do not expect most of this loss of purchasing power to be recouped until 2023, with wage growth at 3.4 percent versus 2.1 percent inflation.

We do not expect a strong wage-price spiral, however, because inflation expectations (which guide trade unions' collective bargaining efforts) are having less and less traction on wages, in part because of the crumbling power of trade unions. The number of employees who are members of a trade union, the so-called union ratio, has halved since the mid-1980s from almost 30 to 15 percent at present. In addition to the erosion of trade union power, the flexibilisation of the labor market and the strong rise of the self-employed without personnel (zzp'ers) probably also play a role in the increasingly weak translation of inflation expectations into higher wages for employees. Finally, the fact that firms' wage margins have been curtailed by extensive internationalisation may also play a role, as a result of which inflation expectations and wages show an increasingly weak correlation. RaboResearch has previously shown that the wage margin in ten of the fifteen industries with international operations is less if productivity and wage cost developments of the international top are taken into account.


[1] The stringency index measures the stringency of corona measures to contain the spread of the corona virus. The index measures eleven indicators, including school closures, workplace closures, and cancellation of public events. 

Hugo Erken
RaboResearch Netherlands, Economics and Sustainability Rabobank KEO
+31 6 2223 1650
Leontine Treur
RaboResearch Netherlands, Economics and Sustainability Rabobank KEO
+31 6 1024 5424
Frank van Es
RaboResearch Netherlands, Economics and Sustainability Rabobank KEO
+31 6 1082 0318

naar boven