This study attempts to understand how the COVID-19 pandemic is affecting the digital economy, and how digital transformation can be leveraged for an inclusive recovery. It develops a framework for understanding the first- and second-order effects to the digital economy, on both the supply and demand side, and then applies this framework to low-income countries (LICs) and middle-income countries (MICs). Analysis is focused on four segments of the digital economy: a) digital infrastructure; b) ICT and ICT-enabled services; c) e-commerce; and d) online work.
To leverage digital transformation for inclusive post-crisis recovery, responsive and targeted policies are needed. New analysis in this paper suggests that governments with a higher digital penetration in 2019 were at the outset able to impose stricter policies to curtail the spread of COVID-19, with ed-tech, health-tech and gov-tech emerging as key solutions in service delivery during the pandemic. The increased demand for internet access in LICs and MICs, however, was largely met through degradation in overall broadband speed, particularly in African and Asian countries.
ICT and ICT-enabled services hold some potential for recovery; however, the share of these services in total services exports remains below 20% in some LICs and MICs. Analysis conducted in the paper using the World Bank’s Enterprise Survey 2020 for selected African countries shows that in all three sectors – manufacturing, retail and other services – firms with a digital response to the pandemic are faring better than those without a digital response. E-commerce is clearly emerging as an important pathway for mitigating economic losses from the pandemic but e-commerce revenues remain relatively small in Africa. Overall, only 2–4% of the population in low- and lower middle-income countries is buying online, with significant differences across gender, age and education, limiting the potential of e-commerce in crisis recovery. The effect on online labour depends on the type of online work being performed; demand in creative and multimedia or sales and marketing support has shrunk but that in software development and technology category remains largely unaffected.