Post-Covid Prospects: The Netherlands

More than a year on since the first case of the coronavirus in the Netherlands was confirmed on 27 February 2020, the vaccine-boosted Dutch economy is fast bottoming out of last year’s Covid-linked recession. While industries involving interactions such as the retail trade, transportation, accommodation, catering, culture, recreation and sports continued to suffer major contraction under continuing stringent lockdowns in early 2021, the Dutch economy as a whole is expected to see its GDP return to pre-pandemic levels by the end of this year.

Timely introduction of government support measures – €700 million on average per week – and the nation’s high degree of digitalisation of economic activities, ranked 4^th among all EU member states in the European Commission’s Digital Economy and Society Index (DESI) 2020, have all contributed to the creation of an effective firewall for the Netherlands to cushion the blow of the hard economic times and stop the fallout from spreading further.

Due to subsiding pandemic restrictions as the country enters the final stage of economic reopening, as well as the EU Digital Covid Certificate that has been created to restore freedom of travel, the Netherlands as a hub for international trade and finance is bound to make a quick comeback as the World Trade Organization forecasts 8% growth in world trade volume in 2021.

Chan: What is the near- to medium-term outlook for the Netherlands’ major industries and trade, in view of the government support that is being provided during the pandemic? When are you expecting the vaccine-boosted recovery to kick in?

Van den Berg: The near- to medium-term outlook for the Dutch economy is positive, thanks to the country’s agile economic structure with a high degree of digitalisation as well as the timely introduction of government support measures. In its recent country report, the EU Commission projects 2.3% growth in 2021 and 3.6% for 2022. The unemployment rate remains low, standing at 3.3% in May 2021, and generous support packages have not off-balanced government finances but cushioned the economic impact of the confinement measures.

The Dutch Central Bank is even more optimistic, predicting 3% growth for this year and 3.7% in 2022. Part of this rosy outlook is underpinned by foreign trade, which showed a robust 20% growth year-on-year in April – though it came as no surprise, considering that April 2020 was when world trade almost came to a full stop. Yet we believe even factoring in these unusual circumstances, it is fair to say Dutch imports and exports have been experiencing a healthy recovery.

During the pandemic, the Dutch Government has deployed several timely financial support mechanisms, spending on average about €700 million per week to back up businesses. While these measures have been keeping many struggling businesses afloat, they are far from sufficient to compensate the losses they have so far suffered from months of tough lockdown restrictions. This also highlights the dire need of reopening, best demonstrated by the nascent signs that since the first wave of reopening starting 28 April 2021, in-person shopping has risen by 70% and online shopping decreased by 8%, compared with the similar period during national lockdowns.

The recovery of the EU-27 economy is further aided by the launch of the European recovery fund, dubbed Next Generation EU. This fund aims to support member states with a total of €750 billion (or €806.9 billion in current prices) of which about half will be granted as subsidies and half as loans. The first round of applications ended at the end of April this year. The Dutch Government has the right to apply for a total €6 billion and will do so after a new government is formed, hopefully by the end of the summer.

Due to the rapid vaccine rollout, we are finally seeing a sustained decline in daily confirmed cases, hospital admissions and coronavirus-related deaths. This means we are getting closer to the complete reopening of the economy. From 26 June, we arrived, sooner than expected, at phase 4 of the national reopening plan, when all establishments can open their doors, subject only to the basic 1.5-metre distancing rules.

As the coronavirus infection rate has soared far more rapidly than anticipated since most containment measures were relaxed as of 26 June, the Dutch government has been left with little option but to reintroduce certain restrictions. These new measures, which largely apply to the hospitality and events industries, will remain in force for the period 10 July-13 August. Among this new round of restrictions is the suspension of the testing for access scheme, an initiative that granted an exemption from the 1.5 metre distancing rule for restaurants and bars. In addition, all discos and nightclubs are obliged to close and all multi-day music and live entertainment events have been suspended for the duration.

When considering whether the original road map to full reopening can be restored (including the lifting of all basic containment measures by mid-August), the government will factor in the success – or otherwise – of these latest anti-infection protocols.

Chan: The Covid-19 outbreak has seen many businesses turn to e-commerce and online services, while people have learnt to work, study and exercise at home. What can you tell us of the digital transformation that has taken place in the Netherlands since the onset of the pandemic? How might these behavioural changes affect the consumer and industrial landscape in the Netherlands in the post-pandemic era?

Van den Berg: E-commerce and online services are by all means the future of business, and the Covid-19 pandemic has just sped things up further. But as with all transitions, the acceleration of digital transformation can come with a few downsides if not implemented in the right way. Very much in line with other developed countries, about 40% of Dutch people have indicated that they are doing more online shopping than before the start of the pandemic. Larger stores and brands are paying greater attention to meet the demand spike amid revenue growth during the Covid crisis.

This, however, seems to have come at the expense of others as about 35% of the population have been shopping less at local and small businesses. Being aware of a possible new wave of Covid-19 bankruptcies in tandem with the phasing-out of the related governmental aids, we are striving to ready our companies for the post-Covid future by strengthening their digital presence and market relevance.

A good example is the Dutch e-commerce company, Coolblue, which achieved a whopping turnover of €2 billion (up 34% year-on-year) in 2020, despite the pandemic. The Rotterdam-based company currently has 14 brick-and-mortar stores in the Netherlands, Germany and Belgium, and is planning to increase its physical and online presence further in the year ahead. Seeing sustainability as a source of competitive advantage in the post-crisis future, the company expanded its bicycle network to fulfil orders bagged in paper in more than 20 Dutch cities, while taking the opportunity to branch out into the renewable energy market by enlarging its sales portfolio to include solar panels and charging stations, as well as green energy generated by Dutch solar panels, wind turbines and CO2-compensated gas.

Chan: International logistics have been upended during the pandemic, hampering both air and sea transportation. How has it affected the Dutch logistics sector? What is the role of the Netherlands, especially given its strong economic roles in Asia-Europe trade traffic?

Van den Berg: The Netherlands has long been a global logistics hub. We are well-positioned to serve as the gateway to Europe, much like Hong Kong as the gateway to mainland China and the wider Asia Pacific region. Especially in the early months of the first Covid-19 pandemic year, the logistics sector bore the brunt of the unprecedented lockdown-led damages. But as global trade stabilised and came back on a more steady uptrend, the Port of Rotterdam, Europe’s largest seaport by far with a throughput of 436.8 million tonnes of goods in 2020, managed to post 4.6% growth during the second half, after a 9.1% decline in trade volumes, despite being fully operational throughout the virus outbreak in the first half of last year. Setting another new step in its recovery, the port saw another 3% growth in the volume of freight handled in the first quarter of 2021.

To further illustrate how the recovery is taking root fast across the board, in April 2021, for example, the total volume of Dutch goods exports was up by 25.7% year-on-year, thanks largely to the strong performance of the transport equipment and machinery sector. This is the highest growth since the start of the statistic in 1995 and is 9.7% higher even when compared with April 2019. Similar patterns have also been seen with regard to imports in April, when the country bought 21.5% year-on-year (9.4% higher relative to April 2019) more from its trading partners.

As the capacity and demand recovery continues apace, the path towards growth remains unabated in the rest of 2021 and 2022. As for air traffic, we are happy to note that despite the many challenges for the global aviation industry, KLM Royal Dutch Airlines, the flag carrier airline of the Netherlands, was able to maintain a busy schedule of at least five direct flights per week between Amsterdam and Hong Kong throughout the whole time of the pandemic, highlighting the strong connection between our two economies and the air hub roles we share in the Europe-Asia route.

Chan: Global trade and investment were weakened by the pandemic as many travelling and business plans were shelved or postponed last year. Looking forward in 2021 and beyond, what do you see as the most promising sectors or areas for the Netherlands-Hong Kong collaboration?

Van den Berg: Despite the unprecedented scale of the current global health emergency, the economic foundations of both the Netherlands and Hong Kong remain solid. Many businesses are anxiously longing for the world to reopen and to resume travelling and investing. With the uptick in vaccinations, there are good reasons to be cautiously optimistic. In fact, the Netherlands, in line with the EU-wide recommendations, has started to welcome travellers, business or leisure, from Hong Kong since 24 June. As for the Dutch and wider European business community, many, including myself, have great hope that Hong Kong would consider reciprocating these moves by taking further steps to open up its border for international travel.

Most if not all the promising sectors and business areas for bilateral collaboration will continue to see good potential ahead. Just to name a few, we believe finance, in particular green finance, logistics, trade (merchandise and services) and design will lead the way, while anything related to sustainability, especially high-tech innovations should also be high on our agenda, given the common threats of climate change.

As a good illustration, my Consulate hosted in June a hybrid event on tackling food waste, which underscored the momentum to share best practices and work together on the related topics. This goes without saying that health sciences is another area that has clearly risen to prominence amid the pandemic, widening the window of opportunity for deepening co-operation.