ABSTRACT
The COVID-19 shock affected the global economy mainly through the col-lapse of demand, labour supply and industrial output, supply chains, commodity prices, international trade and capital flows. From the second half of 2020, various bottlenecks (logistical disruptions;shortages of raw materials and parts) in the EU economy have had a growing impact on growth. Following the recurrent pandemic shocks, the war shock has caused further severe supply-side disruptions from February 2022 onwards, in particular in raw materials markets (including energy sources and agricultural raw materials) and international logistics. Supply shortages in the EU have not only a one-off but also a ripple effect throughout the economy. Spill-over effects across Member States are of great importance. Together, the shortages of production inputs can have a significant negative impact on output and the recovery of the economy. At the same time, supply-side shocks can have a significant impact on the restructuring of supply chains, the deepening of green and digital transformation, and productivity growth. © 2022, Economic Laboratory for Transition Research. All rights reserved.
ABSTRACT
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-a-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.