Euler Hermes: Digital-enabling countries more resilient to COVID-19 shocks

A recent report by Euler Hermes and Allianz has shed light on the importance of digitalization in building resilience in the face of economic shocks, particularly evident during the challenges brought about by the COVID-19 pandemic. The Enabling Digitalisation Index, which assesses the ability and adaptability of countries to foster the growth of digital enterprises based on five key components - regulation, knowledge, connectivity, infrastructure, and size, has proven to be a crucial tool in understanding the digital readiness of economies around the world. Alexis Garatti, the Global Head of Economic Research at Euler Hermes, shared some key insights from the report in a recent interview with CNBC Africa. Garatti emphasized that countries with well-advanced digital economies demonstrated greater resilience when faced with crisis situations like the one caused by the pandemic. The report highlighted how digitalization significantly improves a country's ability to withstand economic shocks. In terms of global rankings, the United States continues to lead the pack in digitalization. However, China has made significant progress, climbing more than five ranks in the index, signaling a rapid advancement in digital readiness. The competition between the US and China in terms of digitalization calls for a careful approach from US authorities to maintain competitiveness and keep up with China's pace. Notably, Nordic countries also emerged as strong contenders in the digitalization space, showcasing better macroeconomic performance by swiftly organizing vaccination programs and implementing stimulus policies during the crisis. Their proactive approach towards digitalization played a crucial role in navigating the challenges brought about by the pandemic. Within Africa, the overall digitalization score stands at 30 out of 100, with South Africa leading the continent in digital readiness. Despite South Africa's prominent position, other African nations like Morocco, Egypt, Nigeria, and Senegal are rapidly catching up, highlighting a clear trend of progression in digitalization across the region. One of the key areas where African countries, in general, have shown significant progress is in knowledge. The report pointed out the importance of quality education systems and strong ties between universities, schools, and the business sector in driving digital growth. However, challenges remain in terms of connectivity and infrastructure, with South Africa experiencing a decline in rankings due to delays in improving connectivity quality, as compared to its peers. Nigeria, on the other hand, showcased notable advancements in knowledge and scored 28 in the overall ranking. While the country has made progress in connectivity and infrastructure, there is still considerable room for improvement in these areas to enhance its digital capabilities further. Looking ahead, the report underscores the critical role of infrastructure and connectivity in shaping the future of digitalization. Organizations like the World Bank and the African Union are spearheading development initiatives in digitalization to bridge the infrastructure gap. The report estimates that continued investment in quality infrastructure could generate over $300 billion in economic benefits for Africa, with a 10% increase in digital coverage contributing an additional 1% to overall economic growth. As countries strive to enhance their digital capabilities, the emphasis on building a robust infrastructure and fostering connectivity will be key to unlocking the full potential of digitalization and driving sustainable growth in the post-pandemic era.