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Digital-enabling countries proved more resilient to the Covid-19 economic shock

  • Our intuition was that most digitized economies performed better in terms of absorption of the shock during Covid-19 (digitized supplies allow better and quicker remote working, digitized demand allows bypassing confinement thanks to platforms of consumption, digitized administration has better management of testing, tracking, isolating and vaccination). We indeed made the proof that among 78 different economies tested, one point higher in the ranking of EDI allowed a better absorption of the shock on average by 0.25 percentage point of growth.
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  • Our estimate allowed to differentiate four groups of countries:
  • Group 1: High ranking in EDI, better macro performance during Covid-19.
    Inside this group we have two sub-groups; subgroup 1: most elevated EDI allowed stricter stringency and equal performance with subgroup 2 despite higher exposure to service activities ; subgroup 2: lower EDI compared with subgroup 1, could not afford high stringency and equal performance with subgroup 1 despite lower exposure to service activities. This more refined decomposition puts really in evidence the critical role of digitization
  • Group 2: Median ranking and lower growth performance compared with Group 1
  • Group 3: Worst macroeconomic performances amid low EDI
  • Group 4: Other (often African economies), simply less impacted by the sanitary crisis.
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  • The results of our global Supply Chain Survey confirmed that higher digitization means higher resilience. Digitalization correlates with resilience in the supply chain survey. In fact, digitalization means agility and pro-activity. According to our survey, highly digitized companies have taken swift actions to mitigate the supply chain disruptions in 2020. And low digitization is synonymous with indecision: 35% of less digitized companies neither agree nor disagree when asked if the pandemic will push them to find new suppliers, double the share of highly digitized companies).
  • Digitalization means better knowledge and preparedness for the future: 80% of mostly highly digitized companies know their Tier-2 suppliers vs. 61% of the less digitized. As those companies are faced with more diverse and complex risks, they also have a better information management system and better risk analysis. 25% of less digitized companies state they would prefer a local supply chain but their market or company cannot afford a cost increase vs. 9% of highly digitized companies.

Contact

Alexis Garatti
Euler Hermes
Georges Dib
Euler Hermes