The Economic Casualties of COVID-19

Numerous Opportunities Are Hiding in Plain Sight

30 November 2020

Ingenuity and adaptability are required by both the private and governmental sectors if they are to successfully implement the lessons learned from the pandemic-caused recession.

There is nothing classic or normal about the current COVID-19 situation we are facing. A stark beginning, but necessary all the same.

The governments of Central Europe are being stretched beyond their capacity; they are putting all their collective efforts into battling the COVID-19 epidemic, and fiscal policy is suffering as a result.

Nevertheless, they will eventually have to contend with the growing national debts, and austerity – unlike ten years ago – is not an option.

New surroundings

Figuring out where we are before plotting out a course of recovery is essential. However, the very type of data that analysts have traditionally used for economic analysis has changed.

Previously, economists have used monthly or quarterly data to disentangle trends in the economy, make predictions and model the behaviour of the economy. Today, we are living in a world when everything that happened three or four weeks ago is not as important or relevant, so looking at the data which is one month behind is, in a way, useless.

Economists and analysts have had to develop innovative approaches to this problem. For example, during the first wave of the epidemic, they looked deeply at the Internet, at such relevant data as electrical demand and data about aircraft haulage or payment transactions.

These are the kind of data sets that banks, mobile companies or Internet giants made public and does incorporate information about the movement of people. But, at the same time, we have to acknowledge that the reliability of those data sets is limited.

Industrial production and retail sales may be more reliable, but they are quickly being outdated as mentioned above, so in all likelihood, these new approaches will stay with us for some time.

Faulty forecasts

One of the largest issues facing businesses during the pandemic has been the sheer unpredictability of the markets and economies due to many factors, but certainly the fluctuating levels of governmental restrictions.

Moreover, with uneven ideas such as a potential employment freeze to combat the growing unemployment figures or the ever-increasing government debt from extensive benefit schemes, companies which are not able to or are reluctant to adapt might be artificially buttressed using scarce public funding.

The necessarily changeable nature of lockdown measures is unavoidable, but the continued lack of clear government guidance will continue to haunt economic models for the foreseeable future.

Opportunities abound

One yet untapped area for development would be significant private and public cooperation during this crisis since the private sector tends to move much quicker than the more conservative government organisations.

In Czechia, for instance, the private hospitals were pushing to open for non-COVID-19 patients. In the end, the government disagreed with their plans and had them convert the facilities to accommodate more COVID-19 beds, but there was at least an attempt by the private sector to address the quickly growing need of non-pandemic focused healthcare.

Propelling the digitalisation of services, especially government services, would be an excellent use of this time as well.

However, due to the sheer size of the economic shock we are now in, many businesses are scaling back investments even in the much-needed digitalisation.

The reason is simple, when looking at where to cut costs, new investments are often the first to go; however, in this case, it could greatly hamper the efforts to recover.

Nevertheless, there have been endeavours in Central Europe to move businesses online and to the global stage. In Prague, there is a considerable number of B2B enterprises which have begun offering digital solutions to far-flung clients around the world.

Similar stories are coming out of Poland, but they are still fewer than is required. Unfortunately, they must contend with the same conservative tendencies mentioned above, and if they aren’t willing to adapt, their days may be numbered, one way or another.

 

 

This is a summary of a discussion between Martin Ehl (Chief Analyst, Hospodářské noviny), Ignacy Morawski (Founder & Head, SpotData) and Martyna Trykozko (Deputy Editor-in-Chief, 300Gospodarka) at the New Europe 100 Forum on 27-28 October 2020, edited by Galan Dall, Editor-at-Large of Visegrad Insight. Find out more about the upcoming New Europe 100 Forum, future activities and our partners here. For updates, follow @NewEurope100.

The article is part of a project supported by the International Visegrad Fund.

 

 

 

 

Galan Dall

Managing Editor of Visegrad Insight

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