Report: Crisis will speed up digitalization of Estonian economy

Computer. Source: Bhikku Amitha/Pixabay

A report on the impacts of the coronavirus crisis on the Estonian economy presented by the Foresight Center on Tuesday concludes the crisis is further accelerating the trends towards the automatization and digitalization of processes and will quicken the changes in the structure of the economy.

"On the back of the corona pandemic, a change in global economic relations is gaining momentum. The winners will be those sectors of the economy and businesses that are fed by the trends towards automatization, digitalization and relocation into digital channels, as well as those benefiting from ever stricter environmental requirements," the head of the Foresight Center, Tea Danilov, said.

She said that after the end of the crisis, the economy and society will be significantly more digital.

Danilov said Estonia must choose between the expensive preservation of the existing economic structure and seeking a new path. "With each new day, the possibility is narrowing that after the end of the virus crisis we can continue from where we used to be in spring," she said.

The head of the Foresight Center said changes on the labor market caused by automatization and digitalization will also hit Estonia fast, foremost jeopardizing the jobs of people with intermediate skills, while the shortage of top specialists will increase. 

The Foresight Center has put forward three scenarios when it comes to the future of the Estonian economy. According to the first scenario, the preservation of existing businesses and jobs, and avoiding deterioration in the social situation, will be seen as paramount. In order to support the recovery of economic growth, mainly large and strategic enterprises will be supported.

According to the second scenario, the country would bet on an economic policy foremost on the capability for spontaneous renewal in the course of the crisis and will try and keep the costs related to social policy under control in order to avoid undermining the business environment. 

The third scenario would see Estonia make use of the crisis for the renewal of the economy, but provided that the gains and losses can be distributed sensibly between the various groups of population and an agreement is reached concerning important choices being to do with the organization of life in Estonia, such as the use of natural resources.

Under that scenario, priority would also be given to the renewal of the economy and infrastructure in accordance with the EU action plans on a digital turnaround and a green turnaround. 

"The choice that has to be made by Estonia is between whether we wish to salvage as many companies as possible with the taxpayer's support in the virus crisis, engage in the creation of a favorable economic environment while leaving companies at the mercy of market forces, or try and renew the structure of the economy with the support of the state," said Uku Varblane, expert at the Foresight Center.

The aim of the report detailing the impacts of the virus crisis on the Estonian economy and exploring potential scenarios for the period until 2030 is to offer a quick assessment of the developments taking place during the virus crisis and upcoming changes. The report foremost focuses on the economic impacts and outlooks for the future, including how the structure of the Estonian economy and the country's competition position vis-a-vis other countries may change. 

The Foresight Center is a think tank at the Estonian parliament; its tasks include analyzing long-term developments in the society, identifying new trends and development avenues, and drafting development scenarios. 

Chamber of Commerce, Industry: Estonia should support digitization with concrete measures

Mait Palts, director general of the Estonian Chamber of Commerce and Industry, said that the state should support companies' digitization efforts with concrete measures.

Both the Foresight Center and the Chamber of Commerce and Industry found that the crisis is further accelerating the trends towards the automatization and digitalization of processes.

"We can see that the willingness of companies to automate and digitalize has clearly increased, but investment is still held back by uncertainty. In order to get out of the situation faster and ensure the continued competitiveness of Estonian companies, motivational measures by the state for equipment and technology that help mitigate risks are needed," Palts said.

However, Palts said the current reality is that while there are soft measures that help to create the conditions for digitization, they do not really lead to that.

He added that in the future, labor market measures must be more supportive of people's qualifications and future prospects because, without a skilled workforce, there will be no leap forward in entrepreneurship.

"Estonia will never start teaching all kinds of qualifications, and in the conditions of economic growth, there will be a shortage of labor in areas where local people do not want to work. Therefore, we must also increasingly address politically sensitive issues, such as the current unreasonable restrictions in migration policy," Palts added.


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Editor: Helen Wright

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