The devastating effect of lockdown measures to contain the COVID-19 pandemic on the EU economy, is starting to get measured. Local socioeconomic characteristics determine the sensitivity of regional economies to restrictions on public life.
A bleak picture for most regions
In reaction to the COVID-19 pandemic, EU countries set heavy restrictions on social and economic interactions in the first half of 2020. The duration and the severity of these "lockdowns" varied widely between countries and regions, but the economic impact was felt all across the continent.
A projection by the European Commission's Joint Research Center shows what the impact of the lockdowns could mean for regional economies. It's a bleak picture, with all regional economies affected considerably, and some regions projected to lose up to a quarter of their gdp.
National numbers from Eurostat confirm both the magnitude and variability of these numbers. During the second quarter of 2020, the EU gdp decreased by 12.1%, the biggest drop ever recorded. The Spanish economy was hit the hardest, with a steep drop of -17.4%, while the impact on the Finish economy was limited to -4.6%.
Impact = sensitivity x exposure
The difference in impact of lockdowns between countries and regions can be explained by two factors: exposure and sensitivity to lockdowns.
Exposure to lockdown measures can be estimated from the stringency and length of government restrictions, and from data on the reduction in hours worked collected by surveys. Although many lockdown measures were implemented at the local level, this estimate of exposure to lockdowns is only available at national levels.
It is clear that countries in the southern part of the EU were exposed more to lockdown measures than countries in the north.
Sensitivity to lockdowns is a much more local phenomenon. A closure of hotels, bars and restaurants will only have a minor impact on regions that don't have many of these businesses, while touristic regions will see a large part of their economy grind to a halt.
So a first component of lockdown sensitivity is the dependency on tourism, one of the sectors that suffered the most from lockdowns. The number of available tourism beds is a good proxy for this dependency.
The map shows clearly that coastal areas in the south have a higher sensitivity to lockdowns because of their dependency on tourism.
Examples of other sectors that are sensitive to lockdowns are the arts and entertainment sector, which was completely shut down in many regions, and manufacturing, which suffered from value chain disruptions. Sectors like agriculture, energy and public administration on the other hand, are much less sensitive to lockdowns.
So a region's sensitivity is also determined by the structure of its economy: if high risk sectors, like manufacturing, represent a big share in the economy, a lockdown will affect the region more. Agricultural regions will be affected much less. The following map shows the share of employment in high risk sectors for each region.
One of the lockdown measures taken by many countries, was the closure of borders. This brought international trade to a virtual standstill, while for many regions this is an important part of the economy. The dependency on international trade can be measured by the share of international exports and imports as share of regional gdp.
Next to these (mostly macroeconomic) components of regional sensitivity, microeconomic aspects (employment in small and medium enterprises, self-employment), social factors (poverty, youth unemployment) and institutional characteristics (national debt, quality of government) also determine regional sensitivity to lockdowns.
A study carried out on behalf of the European Committee of the Regions on the potential impact of COVID-19 on EU regions and cities, which has informed its
2020 "Regional and Local Barometer" report, quantified and weighted all these factors in order to calculate an overall sensitivity to lockdowns for all EU regions.
The map shows clearly that the potential impact of COVID-19 does not correspond to the usual urban/rural or centre/periphery divides. Southern and eastern regions are more vulnerable due to their high level of micro-enterprises and self-employed workers. Mediterranean and Alpine regions are at particularly high risk due to their reliance on tourism. The economies of a number of regions in central and eastern parts of the EU rely on international trade and supply chains. Central and northern regions in central, as well as individual southern regions, are also exposed to negative impact from COVID-19 due to a large share of employment in risk sectors.
In short: Local response
The impact of lockdowns as a response to the COVID-19 pandemic was severe in all EU countries and regions. But local socioeconomic characteristics determine the regional sensitivity to lockdown measures. Policies to mitigate the effects of lockdowns, and to prevent future ones, should therefore be implemented at the local level.
Follow this year's EU Annual Regional and Local Barometer speech: On 12 October,
President Apostolos Tzitzikostas will give his annual address on the state of the regions and cities of the European Union.
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