Determinants of volatility of economic activity in Europe during the COVID-19 pandemic: Stylized facts

In 2020, due to the COVID-19 pandemic, almost all European countries recorded negative rates of economic growth, with relatively large variations from one country to another in terms of the depth of the recession. From the expenditure side, the decline was most pronounced in the segment of personal consumption and investment. Observed by sectors, the largest decline was recorded in transport and tourism, manufacturing industry and construction. This paper analyzes three groups of factors that could have potentially influenced the variation in the depth of the recession in European countries in 2020 - the application of non-pharmacological epidemiological measures, the structure of the economy and the fiscal policy response. The data reveal a relatively strong negative correlation between the GDP growth rate and the share of the tourism sector, as well as a moderate negative correlation between the growth rate and the stringency of epidemiological measures and a moderate positive correlation between the size of direct fiscal stimuli and economic growth. The decline in Serbia's GDP in 2020 was significantly lower than the average decline in EU countries. During most of 2020, Serbia applied looser epidemiological measures, while the share of the tourism sector in Serbia's GDP is significantly smaller, and the contraction in this sector was lower than the European average. Direct fiscal stimuli in Serbia were significantly higher (by 48 percent) than the European average. This may indicate that these three groups of factors could potentially explain the lower decline of the Serbian economy compared to the European average in 2020. To draw final conclusions on this issue, econometric modeling would be required, taking into account the influence of other factors, as well.