Socio-Economic Development of European Countries in Times of Crisis: Ups and Downs

Abstract

This article analyzes the dynamics of the changes in indicators of socio-economic development under conditions of financial and economic crises and their negative consequences. The study proves that financial crises are associated with severe and prolonged downturns in economic activity. The socio-economic development of European countries in times of crises was analyzed. The cyclical nature of the onset of crises was confirmed via the study of the dynamics of socio-economic development indicators. The main emphasis was on the financial crisis of 2008–2009 and the COVID-19 crisis (2020–2021). The main indicators characterizing the crises were identified based on an analysis of literary sources. Their classification was developed according to the following groups: leading indicators, lagging indicators, and client leading indicators of expansion. Based on the correlation analysis, indicators that have a significant impact on socio-economic development and are predictors of crisis onset were identified. The authors suggest considering such leading indicators as increases in the private credit in the GDP, budget deficit, balance of payment deficit, and real interest rate. The major lagging indicators that have strong correlations with the GDP, such as the employment rate, general government debt, stock price volatility, and investment, were identified. Client leading indicators of expansion include unemployment, an increase in the number of new enterprises, an increase in purchasing power, etc. Some indicators, such as unemployment, can be both lagging indicators and client leading indicators of expansion. The negative consequences of the crisis are caused by the crisis itself as well as by the imbalances preceding the crisis. Therefore, the study of the predictors of crisis onset is relevant for timely decision making in order to prevent the negative consequences of the crisis. Based on the identified lagging indicators, the 2008–2009 crisis and the COVID-19 crisis were studied. To study the development processes of these crises, the authors analyzed by quarters the dynamics of the development of the following macroeconomic indicators: the GDP, employment, and investment levels. The similarities and discrepancies were identified in the natures of the emergences and courses of the 2008–2009 crisis and the COVID-19 crisis using the comparison method. The case study of the Eurozone and individual EU countries (Germany, France, Italy, and Spain) was used. Considering the similar courses of the crises, the forecast of the socio-economic development was made using the analyzed indicators during the COVID-19 crisis based on the 2008–2009 crisis data. The forecast approximation indicators were calculated, and a method for constructing further forecasts was selected. Based on retrospective data, the GDP forecast was developed via the use of the extrapolation method for 2023–2024. It is necessary to consider that while forecasting crises caused by unforeseen events and external influences, it is advisable to use qualitative analysis along with quantitative analysis. This article will be useful to researchers, political elites, experts, and financial analysts when developing programs for the socio-economic development of countries.