Credit insurer Coface is cautiously optimistic about a recovery in the Dutch economy

  • The Netherlands maintains the lowest risk rating currently released, but the arduous vaccination campaign sets cautious economic outlook
  • The risk assessments of countries with highly successful vaccination campaigns have been updated
  • The strong performance of the US economy is driving the growth forecast for the global economy
  • The eurozone is unlikely to return to pre-crisis GDP levels before 2022

Credit insurer Coface expects global economic trends to remain unbalanced due to the lingering uncertainties surrounding the spread of the virus. Speeding up the vaccination process and its effectiveness in various mutagenic variants is the key to the economic recovery. In this context, the chances of a return to normalcy are uncertain. However, Coface is revising its growth forecast for the global economy by half a point (+ 5.1% for 2021).

This assessment is mainly due to the stronger than expected growth in the US. However, on the other hand, many European countries will experience a contraction in the economy in the first quarter of 2021 as a result of a prolonged pandemic wave. This development is lowering the economic outlook for the whole of Europe. For the Netherlands, Coface expects a nearly unchanged increase in GDP of 3.5% compared to the previous year.

The country risk assessment conducted by Coface in the Netherlands remains unchanged at Level A2. This means that the Netherlands has the best rating that a credit insurance company attributes to the countries currently. Only 13 of the 163 countries actively evaluated by Coface are rated A2, indicating a relatively low average likelihood that companies in that particular country will default on trade receivables. The A2 rating indicates relatively good push experiences and macroeconomic outlook, but there is still room for further improvement.

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Vaccines
“The economic outlook for the Netherlands is not good enough to be promoted to the highest level, A1. The most important aspect remains the development of the epidemic, not only in the Netherlands itself, but also with its major trading partners. The Netherlands is currently entering the third wave of the epidemic and the vaccination process is slow. However, the outlook for the coming months is uncertain due to possible adjustments in the use of certain vaccines in the Netherlands and abroad. This likely means that the current situation in Europe – from temporary relaxation followed by a return to more stringent measures – will continue for several more weeks. Unless the good weather and degrees help Warmer temperatures contain the epidemic, “explains Christian von Berg, a regional economist in Cofface, northern Europe.

Individual countries with high immunization coverage are rapidly causing noticeable changes to the country risk scale in COFAS. For example, the credit insurance company has already raised the level of state risk in Israel, the United Arab Emirates, Chile, and the United Kingdom in the quarter as a result of successful vaccination campaigns there.

Euro-zone
Coface believes that it is unlikely that the eurozone will return to pre-crisis GDP levels before 2022. Edwin Bossio, Director of Coface Netherlands, explains the current situation: “Below the surface there are a number of important factors that will affect the economic recovery of the Netherlands and Europe. Due to the stable impact of government subsidies, the financial situation of companies has deteriorated significantly in 2020. This could lead to an increase in the number of bankruptcies in Europe. In addition, the increased indebtedness of companies will reduce their ability to invest. Major restrictions on mobility will be lifted. By the end of the summer, the subsidy measures will be phased out. This may also lead to an increase in unemployment. “

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Various support measures have prevented many of the companies affected by the crisis from going bankrupt. In fact, the number of corporate bankruptcies has reached historic low levels in many countries. According to Coface’s calculations, in 2020 bankruptcies were supposed to increase by, say, 19% in Spain, 6% in France, 6% in Germany, and 7% in Italy. The fact that it has likely fallen indicates that many of the insolvencies were delayed rather than avoided. There are a large number of “hidden bankruptcies”, the effects of which will not become apparent until later.

Megan Vasquez

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