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International Internet Magazine. Baltic States news & analytics Monday, 06.07.2020, 11:45

Swedbank chief economist: Crisis to give impetus for digitalization

BC, Tallinn, 26.05.2020.Print version
The need for distancing arising from the crisis is expected to give an additional impetus for digitalization, development of technology and e-commerce, Swedbank chief economist Tonu Mertsina said cites LETA/BNS.

Mertsina wrote that many individuals and businesses have experienced that a lot of work can be successfully done from home and meetings do not have to necessarily take place physically.

"A major rise in video conferences will start to affect business travel -- that will have a negative impact on the transport sector, especially aviation, and the tourism sector more broadly, but a positive effect on the environment, but also on the budgets of companies and state institutions," he said.

The chief economist at the Estonian operation of Swedbank observed that crisis management has been very different at different companies and that probably a bigger proportion of businesses will start to engage in risk management more profoundly now. 

He observed that the global division of labor was changing already before the coronavirus pandemic hit.

"The chains of supply moved closer to the home market and became more regional, yet the current crisis will give an additional impetus for that. The concentration of supply chains however may increase risks and raise production prices in the long run. A more fragmented world may make solving of global problems more difficult," Mertsina said.

Mertsina said it cannot be ruled out that as long as the virus is not fully under control and uncertainty has not fully receded, countries may restrict interaction between themselves in several fields.

"During a crisis many countries, including Estonia, would protect their labor market and the rules concerning foreign labor have been made tougher. Also the rules for state aid, by which one protects companies from one's own country, have been made laxer in Europe," he said.

Financing the foreign debt that has increased steeply will continue to be possible for many countries only if interest rates remain very low.

"The amount of money brought into the economy by governments and central banks, at a time when demand presumably will remain lower, should keep interest rates very low indeed," Mertsina said.

The chief economist of Swedbank said it continues to be unclear how principled accusations will be leveled against China concerning the global spread of the virus.

"That may push the world even more into separate camps. In any case, it has started already and has led to yet another escalation in US-China relations. That may in its turn affect also the global economy, which will ultimately not leave us untouched either," he said.

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