Deep Changes in the Global Economy

By Marko Vidrih on The Capital

The economic crisis caused by the coronavirus pandemic will lead to profound changes in the global economy, said Christine Lagarde, head of the European Central Bank (ECB).

According to her, the transition to digitalization and automation will accelerate, supply chains will become shorter, and the industry will become more environmentally friendly.

As Lagarde said during a speech at the Rencontres Economiques d’Aix-en-Provence economic forum this year online, the European Central Bank will have to maintain an exceptionally soft monetary policy for some time and it will be necessary to develop financial instruments that will help finance the transformation of the economy.

The transition to new economic models will be devastating, most of all in the first two years. Obviously, there will be a blow to employment and production, and in the future, we can hope for improved productivity.

Christine Lagarde
Head of the European Central Bank

The head of the ECB also added that all this will certainly affect consumer prices. Most likely, at first, it will be deflationary pressure, and then inflationary dynamics. According to some estimates, supply chains in the global economy will become shorter by about 35%, and the level of robotics will increase by 70–75%.

Lagarde also noted the rapid growth of online commerce during the period of quarantine restrictions, when many people were forced to stay at home. This trend, in her opinion, will intensify to the detriment of traditional trade.

Earlier, the International Labor Organization (ILO) reported that approximately one in six people in the world under the age of 29 years old stopped working due to the coronavirus pandemic. The pandemics not only led to significant job losses among youth but also “violated the education and training system, created significant obstacles for those who seek to enter the labor market or change jobs”.

Author: Marko Vidrih

Featured image credit: Unsplash

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