The coronavirus pandemic required all levels of government to change their approach to managing and responding to emerging challenges. National Research University Higher School of Economics (HSE) developed a dedicated rating to assess the effectiveness of economic policy during the coronavirus period and the actions taken by the authorities. The rating is based on a composite index, consisting of three sub- indexes that characterize the situation:
- in the labor market (40% in the composite index): the pandemic hit worse the service sector, the basis for the economy of the world’s cities. Maintenance of low unemployment rates and stable social situation became one of the main objectives of national and city authorities;
- recovery of economic activity (30% in the composite index): a rapid restart of the economy and the recovery in the consumer demand make it possible to minimise the negative economic impact from the crisis caused by the pandemic and anti-epidemic restrictions;
- readiness of digital infrastructure (30% in the composite index): access to the Internet and readiness of the city authorities, businesses and citizens to use online services has become an important factor in maintaining a stable economic and social situation in world’s cities.
Calculations show that the most effective economic policy during and after the coronavirus pandemic was pursued by the city authorities of Seoul, Shanghai and Moscow.
The success of the economic policy of Moscow and the Asian metropolises is, first and foremost, related to maintenance of stability in the labor market and a rapid “restart” of the economy after the coronavirus- related restrictions had been lifted. Along with East Asian cities and Moscow, Stockholm also entered the Top 5 - due to minimal restrictions on the work of enterprises and movement of citizens, the Swedish capital's economy was less affected by the coronavirus, but because of this Stockholm lost 0.24% of its population (2.38 thousand people) - 6 times more than, for example, in Moscow.
“Unprecedented measures of government support, high level of digital infrastructure and efforts aimed at rapid recovery of the urban economy allowed Moscow to enter the top of the world’s rating of cities pursuing the most effective economic policy during the coronavirus pandemic, behind only the Asian megacities. At the same time, Moscow was hit much harder by the pandemic. In absolute terms, the economic aid package adopted in Moscow at the city level amounted to $1.4 billion, which can be compared to the volume of anti-crisis financing in Madrid, Berlin and Tokyo. Of course, we still have a certain way to go before we fully recover, but the response of the business and the HSE research results clearly demonstrate that we are on the right track,” comments Vladimir Efimov, deputy mayor of Moscow for economic policy and property and land relations.
The coronavirus pandemic and related safety measures mostly affected the labor market of the world’s largest agglomerations where service industry constitutes a large share of total employment and the level of part-time employment is high. Closure of businesses and economic slowdown during the pandemic resulted in every eighth New York citizen losing a job, the level of unemployment doubling in Montreal (to 15%) or rising by 20-50% in large Western European cities compared to “pre- pandemic” levels. The labor market of large Asian cities – China, Japan and South Korea – turned out more resistant during the pandemic due to the dominating model of long-term employment agreements and a smaller (compared to the US and EU) level of coronavirus incidence.
After the start of the pandemic the governments of most countries adopted plans to fight the economic consequences of the pandemic and preserve jobs that included providing direct support (subsidies/subsidized loans) to companies that don’t dismiss staff.
Most large cities adopted additional measures to support business that included in particular grace period for local taxes, state property rental payments as well as direct subsidies to the most affected sectors (tourism, hotels and restaurants etc.) which also facilitated preservation of companies and jobs.
Moscow, despite a relatively high level of coronavirus incidence and continuous anti-epidemic restrictions, managed to maintain a stable labor market situation: the unemployment rate in 2Q 2020 was a mere 2%, being the smallest among world cities with a population over 10 mln. New York, Montreal and London, the cities with liberal labor laws that were most affected by the pandemic, have become the outsiders in terms of unemployment growth.
Economic activity recovery
Tough anti-epidemic measures were introduced in major cities of the world (apart from Stockholm) during the pandemic, including restrictions on visiting workplaces and public places, using public transport, etc. As the epidemic passed the peak, city authorities began to loosen the imposed restrictions, but the speed of the economic recovery appeared to be different. To measure the speed the HSE researchers used three parameters:
- Workplaces attendance (30% in the calculation of the economic activity recovery index). It is calculated on the base of Google Mobility Reports data and shows the number of enterprises that returned to the “usual” working terms (refusing from or reducing significantly the distance employment);
- Transport traffic (30% in the calculation of the index). It is calculated on the base of Google Mobility Reports data and shows the level of recovery of the public and private transport traffic in the city (compared to the “prior to the epidemic” level);
- Consumer demand (40% in the calculation of the index). It is calculated on the base of local statistical bureaus’ data on retail turnover and shows the recovery speed of the consumer demand.
According to the researchers’ conclusions, the highest speed of the economic activity recovery is reached in Moscow, Istanbul, and Asian metropolitan cities (Shanghai, Seoul). Montreal, Singapore, and Western Europe capitals, which suffered heavily from the pandemic and the borders closure, are among the outsiders.
Digital infrastructure development
The accessibility of online services and digital infrastructure development have proven to be of critical importance for the operation of municipal and emergency services and commercial companies during the pandemic, as well as for providing comfort and security for average citizens. To assess the extent to which cities were ready for active use of digital technologies, the following analysis was made:
- average Internet speed during the pandemic (comprises 50% in the calculation of the Digital infrastructure readiness Index): it is calculated as a simple average of mobile and desktop Internet speed and reflects the possibility (and speed) of accessing to digital online services during the pandemic;
- quality of online services (50% in the calculation of the Index): it is calculated as a simple average of scores of subindexes from the Smart Cities Index 2019 that reflect the quality of online systems, the efficiency of medical online services and the quality of video surveillance systems.
The digital infrastructure of Asian megacities (Singapore, Seoul, Beijing) turned out to be the most prepared for work amidst the pandemic. Moscow ranks 4th among the world’s large cities in terms of digital infrastructure readiness, significantly ahead of the largest cities in Europe and North America.
Official statistics and Google Mobility Reports were used as a research base, as well as the data of Smart Cities Index 2019, which is calculated by IMD together with Singapore University of Technology and Design, and the data about the average Internet speed in certain cities from bandwidthplace.com.