ECB foresees profound changes in global economy
COVID-19 has left its imprint on the global economy. The coronavirus –driven crisis has crippled the steady economic growth, ECB President Christine Lagarde commented on the current state of affairs.
Most countries around the globe managed to stamp out the deadly virus, but this has not calmed down headwinds. On the contrary, the crisis has become the litmus test for multiple burning issues. According to the ECB leader, the economic collapse triggered by the pandemic induced profound changes in the global economy. One of such changes is the focus on digitalization and automation in a variety of industrial enterprises. Christine Lagarde thinks that supply chains are set to be 35% shorter in the post-crisis economy. Besides, Europe’s industry is taking the environmentally friendly approach.
Under the tough challenge, the European regulator has to stick to loose monetary policy. Experts say that in the future, the central bank will come up with new fiscal tools adjusted for a new reality. Citing Christine Lagarde, the transition to new economic patterns could bring about a devastating effect. The labor market and industrial production will take the brunt of it. Indeed, large-scale digitalization will entail massive job losses under new economic conditions. However, in a couple of years the ECB leader foresees a productivity boost. The policymaker warns that the global economy will face deflationary pressure. Later, inflation is expected to gain momentum. Christine Lagarde points out a new global trend. Amid lockdown measures, consumers shifted focus towards online shopping. The ECB President predicts expansion of e-commerce in the wake of the shutdown. With such prospects, the ECB reckons that retailers will have to survive a slump in traditional sales.