Regional growth and disparities in a post-COVID Europe: A new normality scenario

This paper addresses the important question "Which European areas will be able to better react to the crisis induced by COVID-19 and how regional disparities will look like?" To provide an answer, a "new normality" scenario is built, comprising the structural changes likely to take place in the aftermath of the COVID pandemic. To develop such scenario, two intermediate steps are necessary, in both cases relying on the use of the latest generation of the MAcroeconomic, Sectoral, Social, Territorial (MASST4) model. First, short-run costs of the COVID-induced lockdowns, in terms of missed GDP, are calculated for all European NUTS2 regions, needed because of the lack of short-run statistics about the extent of the regional costs caused by the lockdowns that will only appear in 2 years. Second, a long-run simulation of the economic rebound expected to take place from 2021 through 2030 is presented, assuming, among other trends, that no further national lockdowns will be undertaken in European countries. In the "new normality" scenario, regional disparity trends will decrease as a result of a decisive rebound of those countries mostly hit by the pandemic.