BeNeLux Digest 2021 – The State of Economy

March 25, 2021

There’s been something of a hiatus since our last edition, and it’s safe to say there’s quite a variety of topics to cover as, and this is something of an understatement, 2020 and 2021 have been rather eventful.

The subject of Covid-19 has been covered exhaustively, so the last thing we want to do is to go back over the past 12 months. However, the pandemic has of course had profound impacts. Fortunately, we are now seeing signs of recovery across all areas of life and, while a full return to normality still seems a long way off, it’s refreshing to feel the positivity of that future. 

So, let’s focus on the positives that have come from this dramatic shift in our environment and behaviour over the last year.

The Netherlands

The history of the Netherlands shows a highly robust economic power within Europe. In times of prosperity the country has tended to excel in the development of new markets and businesses, while during more difficult times it has repeatedly shown the ability to recover swiftly.

Currently, the Netherlands is the sixth largest economic power in Europe. It is in the right place for the exportation of goods and, in previous years, overall European economic growth has allowed the Dutch markets to grow at a much greater rate than some of its neighbours.

It was only with the outbreak of Covid-19 that these numbers dropped. The end of 2020 saw the Dutch economy fall by around 5.4% of GDP. However, this was an improvement on the start of the year which revealed a contraction of 8.5% of GDP; one of the worst variations in decades.

The worst hit areas were Tourism and Services (fairly disastrous, considering services account for over 69.8% of national revenue and employ 82% of the workforce) after undergoing a complete shutdown for most such businesses. While still below pre-Covid-19 levels, the Dutch economy has made a fair recovery, in some ways thanks to government funding to support many businesses. The forecast for future recovery seems to indicate a growth of 3% of GDP in 2021, and an additional 2.9% for 2022, according to the International Monetary Fund (IMF). These projections are already an improvement from those in October (-1% 2021, +0.9% 2022).

Unsurprisingly, the unemployment rate grew from a historically low 3.4% to 5.5% during 2020. This year we should start to see a swift reduction in this rate and begin recovering to earlier levels. While the year ahead promises to showcase less unpredictability, there is still the difficulty of Brexit within the UK and its potential impact on the Dutch trade outlook.

Generally, 2021 has seen confidence return, with many businesses hiring, expanding and opening up new projects again. The mentality of “let’s wait and see” that held a tight grip throughout last year has dissipated and, with the establishment of remote based working organisations, there is a clear path ahead.


Traditionally, Belgium has benefited from positive growth trends due to being situated between a variety of trading partners and offering access for professional migration. However, this growth was stopped in its tracks by Covid-19. Overall, GDP shrank by 8.3% in 2020. The IMF predicts this reduction will move to 5.4% in 2021 and 2.7% in 2022.

Belgium’s main trade comes in the form of new business investment (something that’s grown exponentially since the announcement of Brexit) as well household and property investments. Both of these areas naturally suffered last year, but there are already signs of recovery, especially in property. New business investment continues to recover, albeit at a slower rate, due to caution given the unpredictability of 2020. Fortunately, the government has announced a variety of generous fiscal stimuli which should support the recovery of the Belgian economy.

Unemployment within Belgium increased from 5.4% in 2019 to 6.2% in 2020, and has been steadily on the rise in 2021. It currently stands at 7.6%, though forecasts predict this will to roughly 6.6% in 2022. Participation within the labour market has been an ongoing issue within Belgium (5.4 million participants out of 11.4 million) and the recent pandemic has not helped change this for the better.

The Belgian economy underwent a period of shock throughout 2020. While challenges certainly remain, with the vaccination of citizens becoming more widespread and the lockdown restrictions lifting, a strong rebound is to be expected as the majority of service industries are allowed to resume trade and foreign business investment picks up.


Luxembourg’s economic backbone has long been defined by its financial sector, which represents roughly 33% of GDP. This provided a layer of insulation that helped Luxembourg weather the initial shocks of 2020. Luxembourgish GDP contracted by -5.8%; a similar downturn to that of their European neighbours. According to the IMF this year, we should see GDP improve by the same amount and gradually return to the 2019 state (3.8%) in 2022.

2020 also saw an increase in unemployment for Luxembourg’s population (up to 6.5% from 5.4% in 2019). Unlike their neighbours, the IMF have predicted this will continue increasing throughout 2021 to 7% before beginning to plateau. However, these figures should be taken with a pinch of salt, considering the number of unemployed citizens translates to around 20,000.

Globally, many workers have transitioned to remote working. For Luxembourg, it is inevitable that many of their cross border workers (over 200,000 in total, representing more than 45% of Luxembourg’s employees) have been negatively affected by the changes this year. These effects can be seen in particular in the Hospital/Health sector as well as other priority sectors that grew increasingly stressed as the year developed.

I would be very keen to know how you perceive the current state of the market in the BeNeLux area. Please feel free to reach out to me to discuss.