Economic Impacts of COVID-19 Crisis: Winners and Losers
Although epidemics are bound to recur with a certain regularity, the humanity was not prepared for a wave of this magnitude and global spread. As a consequence of this epidemic, the economy has suffered through infected or self-quarantined emp-loyees not being able to work, anti-virus measures hindering the normal functioning of the economy, and the crisis-induced uncertainty affecting the behaviour and fu-ture hopes of the people, the businesses and the public sector.
The best general idea of the scope of the economic impact can be gleaned from the change in the total value of the gross domestic product, i.e. the goods and servi-ces produced on our national territory. In 2020, Estonia’s economy fell by EUR 1.75 billion compared to the pre-crisis forecasts. Registered unemployment also increased – by the end of 2020, it exceeded the forecast by 10,300. We also saw the emergence of underemployment, i.e. workers were forced to accept a reduced work load. However, the impact of the crisis is still not fully evident in the statistics that reflect coping difficulties of individuals.
The crisis has affected economic sectors very asymmetrically – there have been clear losers, but the crisis has also been kinder to other sectors, and even generated new business opportunities for some. In the last group, we can find e.g. information and communication, pharmaceuticals, electronics and chemical industries. As ex-pected, the least crisis-resistant are the fields where the restrictions set up to control the crisis as well as the changed behaviour of the people have led to the most drastic changes.
The uneven impact of the crisis also echoes through the recovery phase. There is increasing talk about K-shaped recovery, i.e. a situation where one part of the economy has practically exited the crisis while another remains depressed for a long time to come. The contribution of the sectors related to hospitality, catering and travel services or entertainment is likely to remain lower in the years to come, while certain niches – such as business and cruise tourism – might never recover to their former level.
For every sector, the emerged trends differ somewhat – e.g. covert protectionism in timber industry, or pressure from global competition following the triumph of online shopping.
One of the broader trends that has been amplified by the crisis is the automation and digitalisation of processes, which is set to accelerate in the near future in many economic fields, including the very traditional ones. This process is boosted by the focus on the support packages to relaunch national economies. The by-products of this trend immediately materialise on the labour market as well – mid-skilled jobs are under threat and there is a large shortage of top specialists.
The corona pandemic forces global businesses to review their value chains and improve the risk resilience of these – although very long and complex chains are efficient, they are also extremely vulnerable. A greener economy also means a chan-ged need for raw materials and fuels. Estonia could benefit from increased emphasis on wood based materials, as well as the growing need for battery and earth metals.