First signs of new recession
Everyone still has deep memories of the economic crisis that began in late 2008. Major banks got into trouble and the number of bankruptcies reached a record. Unlike previous recessions, the impact of this one was huge. Although recovery was visible from 2012 onwards, in companies and financial institutions that survived the crisis, the 'fat off the bones' has largely disappeared.
In recent years, the Dutch economy has shown nice stable growth. Next year too, the Dutch economy will continue to grow, although this growth will level off. Yet the first signs of a new economic recession are already visible. The number of bankruptcies is increasing. How soon we will reach a new recession depends on several factors. How will the Brexit play out? Will Italy get its budget deficit under control? Can Macron defuse social unrest in France? How does the Marrakesh migration pact pan out? Do the US and China reach a stable trade agreement? What is Trump's international agenda? We highlight some of them.
How is the Brexit going, now that May is allowed to stay?
Nevertheless, the divisions surrounding the Brexit in the UK are greater than ever. The biggest problem is not the exit itself, but the lack of clarity about it and the uncertainty it brings. Consumer confidence has fallen to an all-time low, the number of bankruptcies in the UK is skyrocketing, British companies are still hardly investing in the home country and foreign investors prefer the European continent. The Brexit deal is becoming the stumbling block for British politics.
Will Italy get its budget deficit under control?
In Italy, spending is currently rising sharply and revenues are falling. This will further increase public debt above 130 per cent of gross domestic product (GDP), making Italy one of the weakest EU member states (see also table below). The interest and redemption on sovereign debt that Italy currently has to pay annually is €65 billion. Most of the sovereign debt is financed through government bonds by Italian banks and investors. Due to the downgrading by Moody's and others of both the country of Italy and its banks, the value of these bonds is falling. The country's productivity is also lagging, worsening its competitiveness.
Table: budget deficit and public debt Italy
| Indicator | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | |
| Government budget deficit/surplus | -4,2% | -3,7% | -2,9% | -2,9% | -3,0% | -2,6% | -2,5% | -2,4% | |
| Level of public debt as % of GDP | 115,4% | 116,5% | 123,4% | 129,0% | 131,8% | 131,6% | 131,4% | 131,2% | |
| Average unemployment | 8,4% | 8,4% | 10,7% | 12,1% | 12,7% | 11,9% | 11,7% | 11,2% |
In autumn 2018, the Italian cabinet came up with plans, which far exceeded European budget norms. The European Commission (EC) did not agree. Although Italy initially indicated it did not want to change anything, the Italian government seems to want to revise the budget after all. If Italy does not come up with a suitable solution, the EC will start criminal proceedings. On 19 December, the issue will come up again in the EC.
Will the US and China reach a new trade deal?
In Argentina, the US and China have agreed not to impose new import tariffs on each other's products for a period of 90 days. They want to use this period to reach a trade agreement. Besides the trade agreement, they also want to reach agreements on intellectual property, agriculture and cyber theft, among others. There is a clear pattern in Trump's negotiating tactics, betting high, matching words with deeds and then negotiating. It is better for the global economy if these superpowers do not get into a trade war.
Forewarned is forearmed
We must learn from the past, consider the present and prepare for the future. This is nicely said but not always easy. Nevertheless, you can often anticipate things to come. Don't wait but take immediate action and prepare. Even in a declining economy, you can seize opportunities. For instance, look for new markets where growth is still possible. Spread your risks both in market areas and in your customer portfolio, do not become too dependent on one or a few large customers and cover your payment risks.
