Classification of the EU Countries According to the Vulnerability of their Economies to the Impact of COVID-19 Pandemic

Purpose: The paper's objective is to identify the similarities of EU countries in terms of the entire sets of indicators. Hence, the multi-dimensional cluster analysis is applied to evaluate the economic vulnerability to the impact of the COVID-19 pandemic. Design/Methodology/Approach: A hierarchical and non-hierarchical cluster analysis method was used in the paper. At the first step, EU countries were clustered with Ward's method, and the following k-means method was applied for grouping countries. Findings: In the study, four clusters were identified. Southern European countries grouped in the 1st Cluster performed the highest level of vulnerability to the negative impact of the COVID-19 pandemic. Germany, the Netherlands, Ireland, and the Scandinavian countries appeared to be the least vulnerable EU economies to the impact of the COVID-19 pandemic and were grouped in the 4th Cluster. The countries of Central and Eastern Europe, most of which joined the EU in the 21st century, were characterized by moderate vulnerability and belonged to the 2nd and 3rd Cluster. Practical Implications: The results obtained can be used by policymakers to make better decisions to mitigate the negative impact of the pandemic on economies. Originality/Value: Most clustering of countries according to the impact of a COVID-19 pandemic examines how the virus spreads from a medical point of view. There is little literature on the economic impact of a coronavirus pandemic. This study will fulfill this gap.