March 26, 2020 / 8:26 AM / 13 days ago

UPDATE 1-Coronavirus outbreak to push Dutch economy into sharp recession - CPB

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AMSTERDAM, March 26 (Reuters) - The Dutch economy will enter its first recession since 2013 this year as the coronavirus outbreak cripples production and demand, drives up unemployment and worsens government finances, the government’s main policy adviser CPB said on Thursday.

The euro zone’s fifth-largest economy could shrink by 1.2% to an unprecedented 7.7% in 2020, the CPB said, depending on how long measures to contain the coronavirus outbreak need to be in place.

“All scenarios result in a recession,” the CPB said, adding that it had no way to determine which of its four scenarios was the most likely.

The Dutch government has closed all schools, restaurants, bars and museums, banned all public gatherings, and is urging everyone to stay home as much as they can in order to limit the coronavirus outbreak.

In its most positive scenario, the CPB assumes these measures can be lifted after three months, which would lead to a 1.2% drop in economic output this year, but a 3.5% rebound in 2021.

In its less rosy scenarios the measures will only be lifted after six months, shrinking the Dutch economy by 5% to 7.7% depending on developments in other countries and the financial sector, with growth returning in 2021.

The bleakest scenario, in which measures need to stay in place for a year, would make the economy 7.3% smaller this year, followed by another contraction of almost 3% in 2021.

In all scenarios unemployment, which is currently at a record low of 2.9%, is set to rise considerably, as companies are expected to cut staff and limit new hirings if the fight against the coronavirus takes longer than three months.

Reporting by Bart Meijer; Editing by Alison Williams and Angus MacSwan

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