The main objective of this paper is to identify the impacts of the COVID-crisis on growth, in particular on growth potential in the European Union (EU), in the context of a broader growth analysis. The quantitative analysis underlying this paper focuses on the financial and economic (“Great”) recession of 2008–2009, the subsequent recovery and the period of the COVID-crisis. We provide a detailed overview of some of the mechanisms of the COVID-crisis on growth.
The COVID-crisis is likely to have a direct impact on the level of potential output. A decrease in investments and labour market hysteresis may have long-lasting effects on potential growth. The former would have a negative impact on productivity. This can lead to increased inequalities and have a negative effect on social cohesion. The future development of divergences among the EU Member States is particularly important. Their possible intensification could disrupt the functioning of the euro area and the internal market.
A lasting source of potential growth in the EU Member States could be productivity growth. Its decisive structural factor is the growth dynamism of total factor productivity (TFP). There are large differences in this area with regard to the level and growth dynamism of performance of the Member States. Narrowing the output gaps vis-à-vis the front-runners through deep structural reforms could be a key factor in raising growth potential. The cleansing effects of crises, which force structural change and resource reallocation, can also create new opportunities for TFP growth.
Authors:Andrea Magda Nagy, Boglárka Konka, and Ádám Török
COVID-19 has been the “hottest” topic in many fields of research during 2020–2021. Our analysis focuses on the publications related to the pandemic in the business and economics area. Using the Web of Science database, the main international research patterns in this field have been analysed. Our research covers less than two years (2020 and part of 2021), but the number of publications is large (more than 1,000) in this limited time span. The publication patterns of the CEE countries have also been examined. Bibliometric and social network analysis was used to assess which countries and institutions published the most during this period. For analysing the main trends in the given field, keyword analysis was performed.
Despite a long period of post-crisis recovery, the COVID crisis caught the EU in a precarious state. The policy and institutional innovations during the financial crisis tempered the macroeconomic imbalances that had caused the crisis. Nevertheless, the EU was left with a strong trend of divergence in economic and social performance because of the lack of sufficiently strong reforms at EU and national levels. But the lessons of the previous crisis were learned. This time around, the EU-level policy and institutional innovations were decisive. The fiscal capacities of the hard-hit countries were strengthened quickly. Green and digital transformation will require a major new wave of innovation in the corporate sector in the EU. This, in turn, critically hinges on improving the quality of public and private institutions and advancing with the implementation of major reforms at the EU level, such as the digital single market or Capital Market Union. Implementing these reforms fully, and preventing later reversals is a key to stemming the trend of economic and social divergence, thus strengthening the coherence of the EU.
The immediate effects of COVID-19 on the global flows of foreign direct investment (FDI) were devastating, resulting in a large drop. Flows to the Visegrad countries were also affected but less than the world average. The fall in FDI was the result of underlying trends that started before the pandemic but accentuated by the latter, creating a “perfect storm”. These secular trends include the digitalisation of production and the birth of Industry 4.0, resulting in more asset-light international production and reorganisations of company networks, the sustainability imperative, making the impact of FDI more relevant than its quantity, and a slowdown in the liberalisation of the policy framework for FDI both in individual countries and at the multilateral level. The recovery of FDI from the shock of 2020 is expected to be long and it will be impossible to return to the pre-pandemic structural and geographical patterns. Building resilience and diversification of production at the expense of the search for the lowest-cost locations will be the top priorities of investors, forcing the host countries to revise their investment promotion strategies focused on cost reduction. In the Visegrad countries, the model based on low labour costs will sooner or later reach its limits.
Relying on the Labour Force Survey and the monthly revenue statistics of the Hungarian Central Statistical Office, we assess the immediate economic impact of the first wave of the COVID-19 pandemic in the first two quarters of 2020. We first analyse the role of job loss, working time reduction, downtime, and telework in adjustment to the crisis. The findings reveal an even more serious setback and increase in inequality than in 2008–2009. School leavers, young workers and unskilled laborers were particularly severely affected. Graduates were less likely to lose their jobs, more likely to switch to telework, and their employers faced a smaller decrease in sales revenue. The revenues of foreign-owned exporters fell more than the average in March but recovered by June. The decline experienced by businesses in the Hungarian ownership was slower but more prolonged.
This paper examines the factors which determine the impact of network communication and network connections on the likelihood of contracting the new coronavirus in the European and Latin American countries. The author presents several data sets to prove the following suggestions: 1) The generalized indicators of economic development and society’s globalization are not indicators of how vulnerable a country’s population may be in a pandemic; 2) Not the economy as such, but the conventional way of life of people, their daily behaviour and habits have a decisive influence on the disease spread; 3) Factors of prevention of illness and health promotion such as the habit of exercise, distance, and network communications use modern online services to become protective factors against the risk of infection only at a certain level of development of the country; 4) In the developed countries, a much broader set of factors than in the developing countries determine protection against disease risk; 5) The evolution of a networked society opens up significant opportunities for the developing countries to improve the quality of life, and the emergence of new, progressive traditions.
The recent pandemic has raised fundamental questions about the traditional role of government. That role has stressed the pursuit of national interests and identified the tools that governments should use in the pursuit of those interests. While over the past century the desirable role of the state was amended to include new objectives (such as equity and stabilization) the focus had remained national interests. This paper argues that this national focus has become increasingly anachronistic and damaging.
The paper analyses the differences of COVID-19 mortality rates (MR) in 24 European countries. We explain MRs on the available, reliable ex-ante economic, health and social indicators pertaining to the year 2019 – i.e., before the outbreak of the pandemic. Using simple regression equations, we received statistically significant results for 11 such variables out of 28 attempts. Our best model with two ex-ante independent variables explains 0.76 of the variability of our ex-post dependent variable, the logarithm of Cumulative COVID Deaths. The estimated coefficient for the variable Density of Nurses shows that having one more nurse per 1,000 of population decreases cumulative COVID deaths by almost 15%. Similarly, one more unit Consumption of Non-Prescribed Medicine decreases cumulative deaths by 5%. It seems that until now those European countries were successful in minimising the fatalities where the population had a high level of health literacy, people pursue healthier lifestyle and the healthcare systems worked with a relatively large nursing force already prior to the COVID pandemic.
The crisis caused by the coronavirus pandemic has prompted governments and central banks to take unorthodox measures aimed at protecting the standard of living of people and sustaining the production and service activities of companies. The policy of aggressively increasing the supply of money has entailed a significant rise in the budget deficit and public debt. It is important to consider the extent of its impact on the escalation of inflation processes and to formulate suggestions regarding the economic policy. Inflation is already higher than the official indicators show it, because it is partly suppressed. The increase in the general price level does not fully reflect the actual inflation rate. We are dealing with shortageflation – the simultaneous occurrence of price inflation and repressed inflation accompanied by shortages. It is methodologically interesting to compare this current phenomenon, 3.0, with the suppression of inflation in the war economy, 1.0, and in the economies of state socialism, 2.0. Such comparisons highlight not only the similarities of these processes but also the differences resulting from the specificity of responses of households and businesses. This paper discusses five channels of unloading excessive savings, indicating the most beneficial ones from the point of view of sustainable economic development in the post-pandemic future. It is particularly important to prompt the conversion of compulsory savings into voluntary savings, and at the same time, to stimulate the transformation of the inflationary monetary reserves into the effective demand expanding the use of existing production capacities and investments creating new capacities.