COVID-19 Crisis and Supply Side Bottlenecks in the EU. Shorter and Longer Term Prospects

The COVID-19 shock affected the global economy mainly through the collapse of demand, labour supply and industrial output, supply chains, commodity prices, international trade and capital flows. From the second half of 2020, various bottlenecks (logistical disruptions; shortages of raw materials and parts) in the EU economy have had a growing impact on growth. Following the recurrent pandemic shocks, the war shock has caused further severe supply-side disruptions from February 2022 onwards, in particular in raw materials markets (including energy sources and agricultural raw materials) and international logistics. Supply shortages in the EU have not only a one-off but also a ripple effect throughout the economy. Spill-over effects across Member States are of great importance. Together, the shortages of production inputs can have a significant negative impact on output and the recovery of the economy. At the same time, supply-side shocks can have a significant impact on the restructuring of supply chains, the deepening of green and digital transformation, and productivity growth.

Automated summary

The global economy has been significantly impacted by the COVID-19 shock, with major disruptions in demand, labour supply, industrial output, supply chains, commodity prices, international trade, and capital flows. In the EU economy, logistical disruptions and shortages of raw materials and parts have increasingly affected growth since the second half of 2020. The war shock from February 2022 onwards has caused severe supply-side disruptions, particularly in raw materials markets and international logistics. These shortages not only have an immediate impact but also create a ripple effect throughout the economy, posing challenges to output and the recovery. Additionally, supply-side shocks can drive the restructuring of supply chains, the acceleration of green and digital transformation, and productivity growth.