The negative effect on the economy as a result of the Covid-19 epidemic will be less severe than previously forecast, according to the government’s planning bureau.
Back in July, De Tijd reports, the bureau was forecasting a shrinkage in the economy of 10.6% for the whole year 2020. Now, however, that forecast has been revised down to 7.4%.
Still disastrous, but not as disastrous as previously thought.
“Our country went through an exceptional recession in the first half of the year, but we note that the economic damage in the second quarter is less extensive than previously estimated. That applies to most Euro countries,” the bureau writes in a document obtained by the paper.
Better still, the bureau forecasts a “partial economic recovery” in the second half of the year and continuing into 2021, leading to a 6.5% growth in GDP for 2021.
That would go some way to cancelling out the negative effects of Covid-19, bringing the country back to the level of the 2019 economy, with a GDP of €477 billion.
Economists speak of three main types of recovery from a blow such as the coronavirus: V, U or L.
A V recovery means a sharp downturn, immediately followed by a sharp recovery. A U recovery spends more time at the bottom. An L recovery is the sort nobody wants: all the way down and then stay there.
For the planning bureau, the 2021 recovery from Covid will not form a perfect V. The recovery will not happen quickly enough to form the classic V. But it will happen.
According to the forecast, the recovery will be driven by exports, and by domestic consumption. The average household income is likely to go down this year by only 0.3% – but that is an average; some will do worse than others.
“The impact on disposable income is very unevenly distributed. A large group has felt nothing and a small group has a hard time,” said Bart Van Craeynest, an economist with the Flemish chamber of commerce Voka.