COVID-19 and the Twin Transition: How the Recovery Can Boost Sustainable and Inclusive Growth
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DOI: 10.1007/s10272-020-0931-z
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Debora Revoltella
COVID-19 and the Twin Transition: How the Recovery Can Boost Sustainable and Inclusive Growth The COVID-19 pandemic struck the EU economy hard. Economic activity fell dramatically in the first half of the year in the EU. Optimism for a quick turnaround in the third quarter of 2020 was replaced by renewed fears about the spread of the virus, and new lockdown measures were gradually put in place in autumn. Still in the mist of uncertainty, the EU economy is expected to return to growth at a slow pace.
• medical – related to the timing for an effective vaccine development and deployment, successes in immunisation, etc.
Uncertainty continues to impede forceful recovery. Uncertainty linked to the pandemic has three dimensions:
• long-term implications – linked to possible structural changes induced by COVID-19, for example, changes in preferences, rethinking of the global value chains, emergence of new business and organisational models, as well as stronger role of the state in economic terms.
© The Author(s) 2020. Open Access: This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (https://creativecommons.org/licenses/by/4.0/). Open Access funding provided by ZBW – Leibniz Information Centre for Economics.
Debora Revoltella, European Investment Bank, Luxembourg.
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• economic – second-round effects of the economic crisis, e.g. persistent shift in consumers’ attitude towards precautionary savings, potential round of delayed corporate bankruptcies or unemployment
High levels of uncertainty pose major concerns to firms, leading many to postpone or cancel investment. Findings based on the latest European Investment Bank investment survey (EIB, 2020) show that uncertainty remains a key impediment to investment, cited as a constraint by 81% of EU firms. The coronavirus pandemic has strongly
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Figure 1 COVID-19 impact on investment in the short term
Figure 2 COVID-19 long-term impact points to a ‘new normal’
Share of firms
Share of firms claiming COVID-19 will impact each factor % 60
% 100
EU US
50
80
40 60 30 40
20
20 0
10 US 2020 Invest less
EU 2020
SME
Broadly the same
Large Invest more
0
Service or product portfolio
Supply chain
Increased use of digital technologies
Permanent reduction in employment
Note: Base: All firms who have invested in the last financial year (excluding do not know/refused responses). Q: What proportion of total investment was for (a) replacing existing buildings, machinery, equipment, IT; (b) expanding capacity for existing products/services; (c) developing or introducing new products, processes, services?
Note: Base: All firms who have invested in the last financial year (excluding do not know/refused responses). Q: What proportion of total investment was for (a) replacing existing buildings, machinery, equipment, IT; (b) expanding capacity for existing products/services; (c) developing or introducing new products
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