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MNI BRIEF: Lower Investment Key Threat To Post-Covid Growth

(MNI) LONDON

Capital stock, labour supply and productivity could all be negatively affected by the COVID-19 crisis and its economic after-effects, according to a paper published by the European Central Bank, though increased digitalisation offers hope for growth.

Capital stock, the main source of the long-term scarring effects observed in past financial crises, is likely to decline as a result of the pandemic, the study's authors said, while the initial impact on labour supply in labour-intensive sectors particularly could be stronger than previously observed.

A possible negative impact on productivity could be offset significantly over the longer term through the increased use of digital technologies, Natalia Martin Fuentes and Isabella Moder write in Issue 8 of the ECB's Economic Bulletin. However, reduced public and private sector investment on research and development due to elevated uncertainty could impair such a transformation.
MNI London Bureau | +44 20 3983 7894 | luke.heighton@marketnews.com
MNI London Bureau | +44 20 3983 7894 | luke.heighton@marketnews.com

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