EU response lessens COVID-19 economic blow

Had the EU institutions not intervened during the COVID-19 pandemic, the bloc’s economy would have seen much worse, says the World Bank report, writes Cristian Gherasim.

The report titled Inclusive growth at crossroads pointed to the governments of member states as much as to the EU institutions stepping in to dampen the impact of COVID-19 restrictions on the very poor. The economic response meant that the most serious effects of the pandemic on employment and income were avoided.

According to the World Bank document, the pandemic exposed and increased deep inequalities, halting progress in multiple areas, including gender equality and revenue convergence in all EU member states. Today, it is estimated that between three and five million people in the EU are "at risk of poverty" on the basis of national value thresholds compared to pre-crisis levels.

“A green, digital and inclusive transition is possible if economic policy is increasingly geared towards reforms and investment in education, health and sustainable infrastructure,” said Gallina A. Vincelette, director for the European Union Countries at the World Bank.

The report shows that some of the economic support systems in place can help with ongoing reforms happening across the European Union. There is also need for a continued approach with government support schemes and vaccination key to the strengthening of companies, employees and households.

As we seen across Europe, given the fact that the pandemic isn’t over, governments respond to the prolonged crisis by continuing to offer state aid even throughout 2021.

Yet, regardless of the response, the COVID-19 pandemic triggered EU's strongest peace recession since World War II, with an economic contraction of 6,1% in 2020.

The World Bank report calls for governments to make sure that sound and well-thought policies are in place as well as active labor market policies to support an inclusive recovery. The report stresses that special attention should be given to vulnerable pre-pandemic workers, such as young people, and the self-employed. These groups are more vulnerable to adjustments in employment in times of crisis and may face longer periods of unemployment or periods when they are out of work and lacking a source of income.

A particular attention in the report is given to women who have been disproportionately impacted by the COVID-19 crisis. The report found that at least one in five women will have difficulty returning to work, compared to one in ten men.

The hardest hit areas of the EU by the pandemic’s economic fallout have been the emerging economies. In the case of Romania, the World Bank report shows that the number of people at risk of poverty increased significantly at the beginning of the pandemic, as a result of the substantial decrease in incomes in the first wave of the pandemic.

In emerging economies, despite rapid introduction of government support measures combined with job adjustment policies contributing to moderating poverty levels, the poverty rates are still expected to remain above pre-crisis levels.

The World Bank's Global Economic Outlook report suggests that we will have strong but uneven growth in 2021. The global economy will grow by 5.6% - the strongest post-recession rate in 80 years. The outcome largely reflects a strong recovery in some large economies, yet sluggish in others.

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