A recession seems inevitable for the European economy, after the contraction in the third quarter. But that’s not necessarily bad news. Economists from the big banks point out that it would actually be good if more companies went bankrupt again and the large call for personnel on the labor market subsided slightly.
According to the Central Bureau of Statistics (CBS), the economy shrank by 0.2 percent in the third quarter. “If there is such a small contraction again in the fourth quarter, we are technically already dealing with a recession,” says ABN AMRO economist Jan-Paul van de Kerke.
One of the major culprits is the high inflation rate because we can no longer get cheap gas from Russia, explains Rabobank economist Hugo Erken. He thinks that the old situation will not return and we will have to get used to the fact that gas is more expensive. “Inflation is a slow killer,” he said. “Households have a little less left over every month and then there comes a time when they start to cut corners.”
Marcel Klok of ING underlines that a decrease in investments last quarter was the biggest slowing factor for the economy. He attributes this to the fact that construction is limited by strict environmental regulations, think of the nitrogen discussion, and delay in the granting of permits.
These are problems that are not simply solved. Yet economists predict only a mild recession. For most companies, staff shortages are still the biggest obstacle, Klok knows. He also points out the announced support from the government to help with the high energy bill.
He believes that the government is actually moving forward because many companies that do not need the support are also being helped. In view of the sustainability challenge facing the Netherlands, it would not be as bad in his eyes as companies that can not do without the cheap gas. “With very energy-intensive companies, you have to ask yourself whether you still want that.”
Van de Kerke thinks that a recession can also bring something of relief to the labor market. It is therefore obvious that the number of bankruptcies will increase. “Necessary,” The Economist calls it. Due to all the corona support, very few companies have been going bankrupt for a few years. That would not fit with a “flexible and efficient” economy. The Church does not foresee a major wave of bankruptcy. “If the number of bankruptcies increases by 50 percent, we will actually only go back to the level of 2019 and then the economy was still running like an ATM.”