(Adds updated economic projections)
AMSTERDAM, Sept 15 (Reuters) – The Dutch government will maintain heavy spending in an effort to counter the effects of the coronavirus pandemic despite a rapid deterioration of the state finances, its draft budget for 2021 showed on Tuesday.
The budget deficit is set to balloon to 7% of gross domestic product this year and 5.5% in 2021, while national debt is expected to hit 62% of GDP next year, as support for workers and companies struck by the pandemic is extended well into 2021.
“In these insecure times, the government chooses not to cut spending but to invest in job security, social safety nets and a stronger economy,” King Willem-Alexander said in his annual speech presenting the government’s new budget.
The Dutch economy is expected to shrink by an unprecedented 5% this year before rebounding by 3.5% in 2021, said the government’s main economic policy adviser, the CPB.
After years of austerity, the Dutch government had achieved a budget surplus of almost 2% last year and had brought down its debt to 49% of GDP.
But confidence in the economy has eroded quickly in recent months, and a national poll published last Thursday showed more than half of respondents expected the economic downturn to worsen in the coming year.
A third of workers in the Netherlands said COVID-19 had already negatively impacted their job.
The COVID-19 pandemic not only dominated the budget itself but also stripped the king’s speech of its traditional pomp.
To avoid crowds gathering, the royal family skipped their horsedrawn carriage tour through The Hague for the first time in 46 years. Their ride normally attracts thousands of cheering and flag-waving fans.
Instead, the king and his wife Queen Maxima arrived by car at the Saint James Church in The Hague as the speech was moved away from the smaller parliamentary buildings for the first time in more than a century.
Ministers and politicians listened to the king in silence, shunning the collective three cheers which traditionally end the ceremony to avoid any possible spread of the virus.
Reporting by Bart Meijer; Editing by Angus MacSwan and Gareth Jones