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Brave New Reality

Brave New Reality

The Netherlands and its brands prepare for the new economy that awaits

Like many states in Europe and beyond, The Netherlands will enter 2021 as a country that is both challenged and chastened. But the Netherlands is also, in many ways, quite lucky. COVID-19 is an unprecedented global crisis, for which there is no established rulebook. But the Netherlands has fared far better than most major countries, even as the coronavirus’s impact on the Netherlands’ most directly affected citizens has undoubtedly been tragic. Through the end of September 2020, the Dutch have recorded more than 105,000 confirmed COVID-19 cases, and some 6,350 deaths.

There has been much to be proud of in the country’s response to the pandemic. As King Willem-Alexander put it in his September 2020 address to the Dutch Parliament, “During the coronavirus crisis, the Netherlands has shown itself to be responsible, united and flexible.” Under the country’s “intelligent lockdown” in Spring 2020, country’s businesses and social services were called upon to close for a time, while others had to quickly adapt to a new reality of 1.5-meter social distancing. Workers moved quickly to institute new work-from-home protocols, while parents and teachers worked hard to give children the best remote education possible. Most impressively of all, the country’s frontline healthcare workers labored mightily, day and night, to give their patients the care and dignity they deserved.

While no one knows what the future holds, many in the Netherlands have begun to look forward to considerable challenges of recovery. True to their country’s can-do spirit and progressive values, many Dutch believe that the Netherlands can emerge from this crisis as an even greater leader in Europe. The Netherlands has long been accustomed to punching above its weight on the global stage. In a year when so much is in flux - that, at least, will not change.

Challenges ahead

Even in the face of a somewhat milder national epidemic, the Netherlands’ uniquely connected business climate means the country has had a high degree of exposure to the global economic downturn. In good times, the Netherlands’ role as a leading economic crossroads had led to years of trade, current accounts, and budget surpluses. Today, however, these same trade, transit, and financial linkages have left the country’s economy highly susceptible to external shocks.

Of particular concern are the Netherlands’ famed banks and financial institutions. This sector had already walked a hard road to recovery following the downturn of 2012-2013 - and now, through no fault of its own, faces the prospect of underperforming assets and declining business volume. It does not help, either, that some of the country’s other most heralded brands and industries - from beer, to energy, to travel booking - have been highly affected by shutdown orders around the world.

Just as important, of course, are the hardships faced by ordinary workers and households. Already, the country’s unemployment rate has doubled in the space of less than a year, and consumer confidence remains low.

As a result of these unique headwinds, the Netherlands’ GDP could decline anywhere from 5 to 7.5 percent in 2020. This is a rate of de-growth that could very well end up worse than countries like Germany, and France, which have more insulated domestic markets. For the same reasons, the Netherlands recovery might proceed more slowly than many of its Northern and Western European counterparts. For the moment, the Dutch government is forecasting a “recovery” GDP growth rate of 3.5 percent for 2021.

Reason for hope

All of that being said: the Netherlands remains, in many ways, far more fortunate than most. If the challenges the country faces are great - so, too, are the resources the Dutch have at their disposal to meet and surmount these challenges.

As the International Monetary Fund put it in a May 2020 analysis note, “The Netherlands has fundamental strengths to weather this unprecedented storm.” Going into the pandemic, the Dutch banking system’s capitalization ratio was high, and its balance sheets were extremely healthy. The Dutch government, meanwhile, entered the crisis with a public debt level sitting at just 48 percent of GDP. This has given the country ample room for deficit spending to support its businesses and citizens. Many EU member states - even major economies - enjoy nowhere near this level of fiscal leeway. While many countries have been forced to slash their budgets and services, the Dutch government has been able to take a different tack. As King Willem-Alexander described the situation to Parliament:

“The government is opting not to cut spending at this uncertain time, but instead to invest in preserving jobs, good public services, a stronger economic structure, and cleaner country, both now and in the future… The Dutch economy and public finances are robust. In recent years we have built up a financial buffer, and we are now reaping the benefits.” Indeed, far from slashing its spending, the Netherlands plans to increase its public debt level to 60 percent (a highly manageable amount) in order to fund a vast array of ambitious support programs and tax cuts. Most vitally, the government has launched a series of three massive wage and job-support stimulus packages. To supplement these flagship efforts, the Netherlands has also enacted multi-million and -billion Euro plans aimed at a slew of goals including: housing construction; nitrogen pollution; infrastructure development; job training; educational support; and arts funding.

Just as significantly, the government has stood by the commitments it made in the wake of a December 2019 Dutch Supreme Court ruling that called for immediate action on climate change. Under the National Climate Agreement and the Climate Act, the country hopes to reduce greenhouse gas emissions by some 49 percent by 2030, with the coal of a climate-neutral Netherlands by 2050. Indeed, some hope that the Netherlands’ will be a uniquely “green recovery”: that the country will use the rebuilding process as an opportunity to realign itself toward sustainable development in ways that might not have been possible had coronavirus not impost a global economic “pause.” Other markets may notch higher levels of bounce-back GDP growth in 2021 and 2022, but few countries are better-equipped than the Netherlands to make this recovery period a true catalyst for social transformation.

What this means, then, is that for the Netherlands, the biggest achievements of the next few years will not necessarily be captured in headline economic figures, but rather in the ways that Dutch society pulls together to create an even more resilient, sustainable, and inclusive economy. Going forward, businesses and brands will have a crucial role to play in building this stronger Holland. Fortunately, as this year’s BrandZ™ analysis will show, Meaningfully Different, socially conscious businesses are still rewarded in the Netherlands – and the country’s iconic brands have already proven themselves to more than capable of doing good while doing well.