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Global economy will not be able to get out of crisis in 2021 – study

Forecasts that the global economy will overcome the crisis caused by the coronavirus pandemic in 2021 are not justified, according to a study from experts at the Higher School of Economics together with the Russian Union of Industrialists and Entrepreneurs.

“Against the background of new waves of the pandemic that have engulfed many countries in recent months, it is already obvious that the initial forecasts of a full-fledged recovery of the global economy from the crisis in 2021 are not being justified,” the study said.

The experts noted that, the factors that negatively influenced the global economy in 2020 have not yet been eliminated. “Different intensities of quarantine restrictions and different rates of vaccination against COVID-19 in individual countries, as well as the emergence of new dangerous strains of the virus, will continue to negatively affect the state of national economies and global supply chains,” experts believe.

All this means, the report concluded, that “governments will need to adapt their economic policies to the conditions of a longer recession.” At the same time, the prospects for economic recovery will depend not only on government actions, but also, to a large extent, on plans and expectations at the level of enterprises.

During the pandemic, the state has demonstrated its ability to effectively help businesses – however, interfering in pricing and strengthening the role of state-owned companies can lead to negative consequences, according to a study.

“The crisis pushed both companies and the state to actively interact. At the federal level, the state has demonstrated the ability to talk with business. The result of such interaction was the prompt solution of a number of problems of industry regulation and the mitigation of certain restrictions,” the study said.

In addition to direct support, businesses were aided by measures that positively affect demand – various financial instruments for direct support of the population during the crisis.

State intervention

According to the experts, there are risks to the economy due to increased control over businesses that have received state support, and interference in pricing. “A separate significant risk is the increased government intervention in pricing processes in competitive sectors (retail, pharmaceutical industry). This can lead to significant distortions in the respective markets,” the report said.

The authors of the study also drew attention to the possibilities of controlling business that appear with the introduction of new technologies. “State digitalization creates a new platform for interaction with business, increasing the efficiency of tools for state support, coordinating changes. However, it is possible to strengthen attempts to control business in all decisions,” the report noted.

Such approach, according to experts, can lead to accumulating risks and disparities in conditions of high economic and technological uncertainty.

In addition, the report said that the takeover of promising companies continues, including by large companies with state participation.

Administrative burden does not decline

The authors of the study noted that one of the goals of the anti-crisis policy was a reduction in the administrative burden and a moratorium on inspections. However, at the company level, there was persistence and, in some cases, an increase in pressure on business. The latter was more typical for small companies, for which inspections mean high transaction costs, the experts write.

The study noted that during crises, the state defines the goal of reducing the administrative burden on business as a priority. “However, at the post-crisis stages, the corresponding activity is significantly reduced. It is necessary to search for mechanisms to sustainably reduce administrative pressure, which implies changing motivations and criteria for assessing activities of control bodies,” the report said.

The digitalization of business processes

Development of Russian companies in the period after the pandemic will be associated with the digitalization of business processes and an increase in the role of human capital, according to a study.

“Digital transformation processes will intensify in all sectors, and in small companies, in sectors with horizontal coordination, the models and formats of business activities will change,” the study said.

According to experts, after overcoming the crisis caused by the pandemic, the companies will continue the trend of developing their own distribution and direct interaction with customers will grow.

“The demand for human capital will significantly change: the demand for the skills of big data analysis and predictive analytics of sales, Internet marketing will increase. The business models of companies will transform towards creating an ecosystem around a person: their health, safety, nutrition, entertainment,” the authors of the study noted.

Along with the increasing role of intangible assets, knowledge and skills in the development of companies, competition for human capital will intensify.

In addition, according to the forecast of HSE experts, a number of traditional sectors, for example, retail trade, are becoming a driver of digital transformation and a source of demand for human capital effective in the digital economy.
Source: TASS

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