The global crisis caused by the COVID-19 pandemic has major consequences for the world of money, economics and finance. Together with financial authorities at home and abroad, De Nederlandsche Bank (DNB) closely monitors the situation, taking action where needed to minimise economic fallout.
In March of this year we published our 2020 annual report. It looks back on a year in which the coronavirus held our society in a tight grip. The economic damage was significant. The level of contraction of our economy was similar to that seen during the 2009 credit crunch. In the meantime, vaccination levels are rising and the prospects of gradual relaxation of the restrictions and thus of economic recovery lie ahead of us. However, a robust and balanced economic recovery cannot be taken for granted.
In June we published our latest projections, in which we stated that after a historical contraction in gross domestic product (GDP) of 3.7% in 2020, the Dutch economy is expected to recover strongly and rapidly, starting in the second quarter of 2021. GDP is expected to grow by 3.0% in 2021, 3.7% in 2022 and 1.9% in 2023, on the assumption that the social distancing measures will gradually be relaxed further, and that they will no longer be necessary by 2022. Based on our projections, by the end of 2021 GDP will be higher than just before the pandemic, and the economy will recover much faster than after the 2008 financial crisis.
In May we published our latest overview of the risks to financial stability, in which we stated that the outlook for economic recovery from the COVID-19 pandemic is bright. There is a likelihood, however, of a delayed recovery and a protracted pandemic. The longer the crisis lingers on, the larger the risks for the financial sector will be. For example, government support measures have caused government and business debt levels to soar. The risk of not everyone being able to repay their debts is increasing. Also, financial market prices have gone up further during the pandemic, and there is a real risk of market corrections. In addition, a downturn in real estate markets constitutes a risk for both homeowners and the financial sector.
We are pulling out all the stops to minimise the ramifications of the COVID-19 crisis, together with other financial authorities at home and abroad, such as the Dutch Authority for the Financial Markets (AFM) and the European Central Bank (ECB). In March, we gave banks additional leeway in order to maintain lending levels and absorb any losses. We lowered their buffer requirement to do so.
The ECB has taken various measures to provide support in these uncertain times. For example, it announced the launch of its Pandemic Emergency Purchase Programme, as well as measures to support banks, allowing them to continue their lending operations.
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