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A view from Belgium and The Netherlands

by Sieb Hoogstra

Current Situation From our office in Brussels we cover the Benelux market and as a Dutchman living in Belgium, I think I have a good view on the way the two countries have approached the COVID-19 threat. Both countries are of course by nature very important trade-oriented countries with economic ties throughout the world. The two countries have relatively small markets with the Netherlands 17 million people and Belgium 11 million people. But with the two largest ports of Europe – Rotterdam and Antwerp – within their borders which serve as a Gateway into Europe and important cities such as Amsterdam and Brussels, the capital of Europe, one can imagine that international travel and trade are very common. The reaction to the COVID-19 threat was however totally different. The Netherlands initially more relaxed with a focus on the economy and going for a ‘group immunity’ whereas Belgium from the start was much stricter in its measures and taking more concrete precautions. Today the situation is more or less similar with minor differences in the execution of the measures. Most shops and all schools, restaurants and bars are closed and most of the people are either working from home or not working at all.   

One major result of the different approach is that Belgium has closed its border with the Netherlands for all unnecessary travel, afraid that the initial lax attitude in the Netherlands would attract Belgians to go shopping on the other side of the border. Closed borders between the two countries is something I have never seen before in my fifty plus years of existence!  

 

Economic Impact 

As everywhere else, retail, hospitality and tourism have seen most impact from the measures that have been taken. But the Dutch and Belgian economy are also heavily reliant on exports and international trade. This strong interdependence in the global economy and the integration into the global value chain has now caused a waterfall effect impacting many sectors and industries.  

The Netherlands is the second largest food exporter in value in the world, after the USA. With global air and sea transport falling back considerably this sector has been hit hard, as have other export focused sectors. Millions of the famous Dutch flowers are being destroyed at the world’s largest flower auction in Aalsmeer. Many Belgian and Dutch companies, that were already preparing for the consequences of the Brexit, now have to respond to this challenge as well. To counter the impact the government has identified air and sea freight, road transport, as well as food and medical supply chains as crucial operations and vital processes. 

On the positive side, is that a major percentage of people are working in the service economy which for a large part continues to operate, even though this is now done through homeworking.  

 

What is the Government doing? 

The Netherlands and Belgium have a very thorough social security system ensuring that workers that cannot go to their workplace or work from home are covered. But as a result of the significant increase in the number of temporarily unemployed, now more than half of the Belgian workforce, have been entitled to a wage or replacement income from the government. 

As an extra complication Belgium went into this crisis without a government. In response to the COVID – 19 crisis the outgoing government, that was taking care of current affairs only for already 435 days, was installed as an emergency government. 

Both governments have put in place economic survival packages for companies and self-employed to overcome the crisis. The main measures take are: 

The Netherlands 

  • Dutch government provides financial help for employers to pay their employees’ wages when they suffer from a loss of at least 20% turnover due to the COVID – 19 virus. 
  • Companies are allowed to temporarily reduce working time, where the government compensates workers for hours less worked. 
  • Payment extensions are put in place for income tax, corporate tax, payroll tax, and VAT. 
  • Compensation of 4,000 Euro for entrepreneurs in most affected sectors. 
  • The 1 million self-employed professionals (ZZP) can benefit from an extra temporary financial support. 

Belgium 

  • Companies can put in place partial employment (shortening of the working week) or temporary unemployment.  
  • Reduced social contributions and income replacement for self-employed suffering decrease in revenue. 
  • Optional deferral of VAT, social contributions and corporate tax. 
  • A compensation of 3,000 Euro for self-employed that have been affected. 

 

It goes without saying that we will experience an economic crisis deeper than the banking crisis of 2008. The most important factor will be how long the lockdown situation has to stay in place. But after the crisis we will have to continue. And hopefully countries will not revert to protectionism and nationalism. For open economies like Belgium and The Netherlands it is important that we can continue international trade. It will not be business as usual but let’s try to learn from this situation and implement the lessons learned. 

 

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