The ECB says that the adoption of digital technologies would be positive in the long term. Digitization is transforming consumption patterns and business models.
“The digitization revolution is practically everywhere and is transforming all economies,” concluded the European Central Bank (ECB). They recently published an economic bulletin in which they mention new consumption patterns and business models.
In the context of the health crisis that the COVID-19 pandemic has caused, the bulletin reviews the accelerated use of digital technologies and how they affect variables for monetary policy. The financial institution considers that the new reality has an impact on job creation or loss, productivity, and inflation.
Facing this unforeseen scenario, the ECB does not rule out taking measures that allow the continent to resume economic growth. The adoption of digital technologies for remote jobs or new financial services is both a challenge and an opportunity for “convergence”.
“Structural policies, such as those on labor, production, and financial markets, may need an adaptation to fully exploit the potential benefits of digital technologies while preserving inclusive growth,” the ECB stressed in the bulletin. The recovery of the European economy would depend significantly on digitization. Economists predict that there will be a 3.9% increase in Gross Domestic Product (GDP) by 2021 and 4.2% by 2022. According to ECB researchers, the momentum for the adoption of digital technologies could be positive in the long term despite the negative impact of the COVID-19 pandemic on productivity.
Digitization Due to the Challenges of the Pandemic
The ECB’s bulletin mentions a survey that they applied to 72 non-financial companies in the industry and services sector. The companies consulted had to answer what the main long-term effects deriving from the pandemic would be.
The effects that the participants mentioned the most were the increase in telework and the acceleration of digitization. Also, factors such as more virtual sales, more e-commerce, and more virtual meetings were the most prominent.
The institution closely analyzes the changes as they are elements that influence the possible macroeconomic decisions of the central bank. Digitization could even accelerate the creation of new payment methods or the development of alternative mechanisms such as digital currencies.
“Some relevant effects of digitization concerning monetary policy are related to production and productivity, labor markets, wages, and prices. The impact of digitization on the economy depends on the national economic structure and economic policies, institutions, and governance,” added the ECB in the bulletin.
The ECB also highlighted that digitization can affect the structure of the markets and the competition. They consider that this could have an impact on innovation and the role that intangible assets play.
Last December, the ECB issued EUR 500 thousand to alleviate the economic situation. At the same time, billions of institutional US dollars entered Bitcoin (BTC) as a form of hedge against a potential surge in inflation.
By Alexander Salazar