The COVID-19 pandemic is expected to have a major economic and social impact in Europe and Central Asia (ECA). The region was already affected by the disruptions in global trade and the sharp fall in commodity prices. Moreover, Europe and Central Asia, in particular, the Western Balkans, South Caucasus and Central Asia, will experience the biggest slump in terms of remittances, which are projected to decrease by 27.5 percent in 2020 according to the projections from the World Bank.1 Even prior to the crisis, the region faced significant challenges with respect to industrialization and digitalization.
Most of the countries in the region have to cope with major infrastructural problems, with internet penetration, e-commerce and digitally-enabled services remaining at relatively low levels. As reliable ICT services are the basic condition for enabling digital manufacturing, this naturally holds knock-on effects for firms in the region that want to reap benefits from the Fourth Industrial Revolution.
Accessing new technologies remains an issue for many domestic firms in these countries, while on the demand side significant financial and regulatory barriers continue to be a serious obstacle. Effects of the COVID-19 crisis on global risk aversion, via financial and credit markets, have made access to credit even more difficult.
However, there have been some positive developments in the region. The Eurasian Economic Union (EAEU) has found that implementation of digitalization could increase employment in the ICT sector by as much as 66 per cent regionally, with a potential increase of 74 per cent in ICT service exports.2 Yet to-date, mostly larger firms and government-backed initiatives have been the beneficiaries of the limited digitalization within Eastern Europe and Central Asia, with micro-, small- and medium-sized enterprises (MSMEs) largely still struggling to make the transition towards digital manufacturing.
The crisis caused by COVID-19 has become a perfect opportunity for MSMEs to improve the quality of their goods or services, as well as work on new strategies for promoting them. The pandemic could become an incentive for the enterprises to implement digitalization in their production and marketing.
At the same time, transformation and innovation in digital skill is necessary for ensuring sustainable business growth in the short term, as well as in the long run. Further efforts should be made to integrate MSMEs into the digital ecosystem, providing them with new tools and technologies so that they can more intensively compete in the market.
The session will explore the following issues: