Effects of Covid: digitalisation and economic growth during the pandemic

The Covid-19 pandemic had closed public life and severely affected economic activities in many countries around the world. Where possible, governments forced or encouraged people to work from their homes to reduce contacts. Nevertheless, it affected economies everywhere and resulted in recessions in many countries. Consumption and demand decreased, supply chains were interrupted and international trade contracted. Although streets and malls were empty, commercial life did not come to a complete halt. A proportion of commerce moved online and jobs to people’s homes using internet connections. To keep this kind of economy going a certain amount of information and communication technology (ICT) capacity is needed at all levels – state, business and people. This paper builds on concepts like digitalisation and the digital divide to assess whether states and societies that are more ICT savvy weathered the Covid-19 storm better. Our hypothesis states that countries with better ICT capacity suffered less economic damage during the pandemic in 2020. To test the hypothesis we will model data from 150 countries. The dependent variable is the economic success which is measured by GDP growth in 2020. The main independent variable is ICT capacity, measured by using the Digital Access Index (DAI) developed by the World Bank. Control variables include GDP growth in the previous year (2019), severity of applied restrictions measured by the stringency index developed by the University of Oxford, growth in government debt in 2020, and exports of ICT services.