Seeds of renewal in the COVID-19 crisis

The future of skills in the EU neighbourhood

The economic impact of the COVID-19 pandemic has hit the ETF’s partner countries hard. The IMF predicts that most of the countries of the southern and eastern Mediterranean, the western Balkans, Turkey, eastern Europe and central Asia will suffer GDP reductions in 2020, even assuming no second spike in infections. Lebanon, where the pandemic has struck in the midst of a political and economic crisis will be hardest hit, with a GDP drop of -12%. The damage for most other countries is in the range of -3% to -7%. Some countries, such as Armenia, Azerbaijan and Kazakhstan are predicted to be less hard hit, and a few, such as Egypt, Tajikistan, Turkmenistan and Uzbekistan to sustain economic growth in 2020 (International Monetary Fund, April 2020). In the event of a second peak in the pandemic, the economic outlook is even more pessimistic. Goods exports are expected to be decline significantly by over 24% in the EU candidate countries, 16% in Russia and 6% in the middle East and North Africa (EC Spring Forecast, 2020).

An ETF assessment of the socio-economic impact of the crisis in its partner countries published today identifies the risks that the downturn entails, in terms of increased unemployment, growing poverty and inequality and polarization between rural and urban areas, and between social strata, with vulnerable groups particularly hard hit by the crisis. Moreover, the diversion of public funds towards health and social protection has reduced investment in human capital and innovation, which are key factors in enabling countries to recover from the crisis.

But dark clouds can have silver linings, and every crisis holds the seeds of renewal. The ETF report identifies key opportunities emerging from the crisis that partner countries can seize and build on for the future if they are able and willing to rise to the challenge.

The COVID-19 pandemic has accelerated the digital transition worldwide, including in the ETF’s partner countries, in education, health, administration, industry and commerce. It has forced countries, in the EU and its neighbourhood, to rethink reliance on worldwide supply chains and look to reshoring and near-shoring as solutions to security of supply. It has given a new impetus to public-private sector cooperation with creative solutions emerging across the EU and the ETF’s partner countries. This applies especially to education and training where the private sector has played a key role in supporting the shift to digital distance learning. It has boosted the shift towards new forms of working, which offer opportunities for a more flexible and distributed modes of work with potential benefits for female employment, youth employment and reduced pressure to emigrate towards more economically dynamic regions and countries.

Human capital development is key to unlocking these opportunities. The ETF has identified five priorities that policy-makers in its partner countries should consider as key to recovery:

  1. Incentivise skills development, upskilling and reskilling across the economy;
  2. Invest in digital services and training of public service staff;
  3. Use data to address areas of vulnerability;
  4. Focus on education and training and transition to work for the COVID-19 generation;
  5. Think to the future, and do not sacrifice investment in human capital development, innovation and industrial development to the immediate needs of the crisis.

The COVID-19 crisis has brought innovation opportunities, creative ideas and new forms of cooperation between the public and private sector. Countries must build on these to sow the seeds of more inclusive, greener and sustainable societies.

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More information

Mapping COVID-19: the socio-economic impact