The COVID-19 pandemic highlighted the importance of digitization for economies to add value to society and contribute to population health and economic growth. In the second episode of UR podcast, we talk to economist Mercedes Comas to learn more.
The combination of digital assets and digital skills has played a key role in fighting the pandemic and building resilience in the face of economic collapse. Digital media have made it possible to track the spread of the virus, provide remote medical information, care for patients, and share knowledge to accelerate the search for cures and vaccines.
In the socioeconomic aspect, the countries with the highest levels of digitization have been able to continue working by limiting the exposure of the active population to the virus. Electronic commerce has increased significantly, enabling safe consumption, and continuous training has been possible thanks to e-learning. Last but not least, digitization has helped connect people during quarantine periods by avoiding physical contact.
From the perspective of the level of digitization, which countries were the best prepared to face the pandemic?
BBVA creates an index that aims to measure the state of digitization around the world to compare levels between countries and identify areas that require action. 19 indicators are considered that are grouped into three main pillars: digital supply conditions (infrastructure and costs), demand conditions (adoption by users, governments and companies), and institutional environment (regulation).
The results for 2020 show a global improvement in the digital frontier, measured by the degree of digitization of 99 countries that are surveyed.
The top five countries in the digitization ranking are Denmark, Hong Kong, Singapore, the United States and the Netherlands.
By region, most of the digitized countries are in the Western Europe, North America (United States and Canada), Southeast Asia and Oceania regions.
In our region, Chile is the best positioned country (42nd out of 99 ranked) and Uruguay is in the middle of the table, ranking 53rd.
And which countries have made the most progress in the year of the pandemic?
The most outstanding advance in 2020 compared to 2019 is achieved by New Zealand that goes up 31 positions in the ranking, also Indonesia that advanced 26 positions.
Some countries have reached levels of digitization well above those expected in their income levels, such as Luxembourg, Singapore, Qatar and Ireland.
Most developed countries have made little progress compared to 2019, which could mean that they are already close to the digitization frontier.
The most important advance has occurred in countries that lag behind. However, a wide digital gap remains between developed and emerging countries in terms of digitization.
What are the areas that have the most impact on digitization?
The infrastructure dimension performs relatively poorly in most countries. On the contrary, the dimensions of the demand side related to the adoption by different agents show better results. These observations suggest that for the progress of digitization to occur, higher levels of infrastructure are not a necessary condition, but some levels above certain thresholds could generate a high degree of adoption.
On the other hand, high costs are often associated with poor infrastructure and weak regulation, and this is a common feature in countries with the worst overall digitization index performance.
The results of the index also suggest that having more “balanced” dimensions than those that make up the index are associated with better digitization results.
In summary, the pandemic led to an improvement in the levels of digitization of the countries, particularly in several that were further behind, but there is still a long way to go due to the existing gap with advanced economies, and digitization is a relevant dimension for the growth and economic development of a country that should be promoted in collaboration with governments, the private sector and regulatory bodies.
What is also clear is that the achievements that digitization has driven will extend beyond the COVID-19 pandemic.
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