Digital economy offers some shelter from COVID storm

Digital infrastructure helped the UK to absorb and rebound from the economic effects of COVID-19, according to Euler Hermes. Germany and the US were able to limit the economic impact of COVID-19 thanks to the strength of their digital offering and the proportion of their economies within the services sector.

The trade credit insurer’s Enabling Digitalisation Index, which ranks countries in order of its digital capabilities, places the US, Denmark and Germany in the top three countries for offering opportunities for digitalisation.

But while European countries make up five of the top 10 for enabling digitalisation, China has risen the most rapidly up the rankings, from 9th to 4th, thanks to an increase in its “innovation capability”.

Euler Hermes’ EDI measures the ability and agility of countries to help digital companies thrive and traditional businesses harness the digital dividend. It uses a 0-100 index rating and is based on five components: regulation, knowledge, connectivity, infrastructure and size. It shows that every point won in the ranking translated into a 0.25pp GDP growth boost during the crisis.

The report also found that Hong Kong is rising fast up the rankings, moving from 11th to 7th in the space of a year, while the Netherlands and Switzerland dropped five and three places respectively.

Alexis Garatti, global head of economic research at Euler Hermes, commented: “COVID-19 perfectly illustrated the importance of a strong digital economy if firms are to be resilient and adapt to fast-changing global markets. While the pandemic looks set to subside with the global rollout of vaccines and some return to normality, government investment in the digital infrastructure of tomorrow will be as important as ever.

“The UK’s digital infrastructure performed well throughout the crisis but standing still is not an option. With Asia moving fast up our rankings, the UK and many others across Europe will need to do all they can to support their digital economies as they look to attract and retain the finest talent and firms.

“Commitments to training the workforce and investing in research and development capabilities are key, but so too is education and digital competencies. With Asia’s presence looming large, investment in the potential of the UK’s knowledge base will prove invaluable in the chancellor’s next Budget and beyond in coming years.”

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