Major events that have influenced the global economy in 2020

Experts from 2019 predicted a slowdown in global GDP growth in 2020 due to trade wars and geopolitical conflicts. In fact, everything happened just like that, only a pandemic was added to this, the consequences of which surpassed all other factors in influence. The world economy has experienced a powerful shock, the fall has become one of the largest in history.

Year under the sign of the crown

The main negative consequences of the pandemic occurred primarily due to lockdowns introduced in countries to prevent the spread of infection. It can be said that states have sacrificed economic interests in order to save people's lives.

Despite restrictive measures, COVID-19 has spread to almost the entire planet. Taking into account the figures in December 2020, more than 77 million cases of the disease and 1.7 million deaths were registered in the world.

Uncertainty about the further development of the epidemiological situation and economic recovery still remains in the spotlight.

Decline in economies

According to the IMF, the fall in the global economy in 2020 amounted to 4.4% year-on-year. The decline in GDP in developed countries is estimated at 5.8%, in developing countries - at 3.3%.

Asian countries were better prepared for the pandemic. Thus, China's harsh reaction to the crisis in China allowed the country's economy to return to growth already in 2020 - by the end of the year by 1.9%.

The effect of the crisis on Russia is estimated at a 4.1% decline in GDP, in Italy, the first to bear the blow of the coronavirus impact, by 10.6%, Spain - by 12.8%, France - by 9.8%.

The volume of the world trade in goods in 2020 decreased by an average of 8.1%. As restrictions were lifted, activity began to recover in June, but repeated waves of coronavirus are likely to hold back further recovery.

The effect of the pandemic on activity in the industrial sector was less than in trade. According to the CPB Netherlands Bureau For Economic Policy Analysis, global industrial output decreade sharply at the peak of the “first wave” of the pandemic, by 12.2% in April and 11.5% in May.

As the world economy adapted to the new conditions, the world industry began to recover.

Despite the deterioration of the epidemiological situation, in November, the index of business activity in the manufacturing sector rose to 53.7 points - the highest since February 2018.

Industrialists are pointing to output growth as international trade flows recover. The industrial PMI index in developed countries rose to 53.8 points, the index in emerging markets increased to 53.9 points. In a number of countries, the industrial PMI index in November was below 50 points: Greece, Mexico, Russia, Malaysia, Japan, France.

Negative oil price

April 21, 2020 entered the history of the oil market. On this day, in electronic trading on the New York Mercantile Exchange (NYMEX), quotes turned out to be negative. May futures traded at minus $40 a barrel. After the quotes returned to positive values, but still record low since 2002 - below $19.

But there will still be a day in history when oil sellers were ready to pay buyers for the supply of their raw materials themselves. The more interesting to understand how this could happen.

Overall, 2020 has been a very difficult year for the oil industry. Even before the pandemic, there was a sharp aggravation of relations between Iran and the United States, as a result of which oil prices rose from $65-66 to $71-72 per barrel.

With the spread of the incidence of coronavirus infection due to the lockdowns being introduced, the closure of borders, there has been a rapid reduction in energy consumption. Demand for oil fell.

The oil-producing countries could not reach an agreement and abandoned the deal to reduce production, which could stabilize the situation on the market.

The collapse of the OPEC+ deal provoked the largest price shock in the history of the oil market. The increase in production by exporting countries and the ongoing collapse in global demand have led to an almost full load of world oil storage facilities. As a result, it became physically impossible to carry out new deliveries of raw materials.

Therefore, by the middle of spring, the price of Brent oil had fallen to a minimum for 21 years and at the moment fell below $16 per barrel. And the cost of American WTI raw materials for the first time in trading fell by 300% at once - from $18 to minus $37.6 per barrel.

Russian oil Urals fell in price at the spring peak of the pandemic to $8.4/bbl. After the entry into force of the OPEC ++ agreement to limit oil production, as well as against the backdrop of a slow recovery in demand, quotes rose to $40-45/bbl by the summer, and by the end of December, Urals rose to $51/bbl.

Commodity markets

Energy commodity comes second after oil in terms of the scale of the fall in global demand in 2020 is coal (a decrease in demand by 7%). The decline in global gas demand in 2020 was 3.3%.

Renewable energy sources became the only segment of the global energy market that did not experience a drop in demand in the past, the demand for them grew by 0.9%.

Prices for many metals by the end of the year not only recovered from the fall in the spring, but also rose significantly, largely due to increased demand from China.

The whole world is in debt

The severe economic recession has caused a record increase in global debt. According to the Institute of International Finance (IIF), by October 2020, its amount increased by $15 trillion and exceeded $272 trillion. At the moment, the amount of debt exceeds the size of the global economy by more than three times.

The biggest debtors were primary developed countries. Thus, the US debt level is almost 384% of GDP, in the Eurozone - 416%, Great Britain - 501%, Japan - 633%.

Countries were forced to compensate for the loss of business and population amid lockdowns and supported demand for products at the expense of the budget. All of this contributed to this growth.

What is next?

The main factors affecting the economy in 2021, as in the past, will be non-economic events. The timing and pace of the recovery of the global economy will depend on the epidemiological situation, possible repeated waves of coronavirus and the reactions of states to them, and the effectiveness of vaccination.

How the virus will spread further is still unknown. However, the expected mass vaccination in the first half of 2021 is encouraging. But at the same time, quarantine measures will be extended to some extent, which means that the risks of a protracted crisis remain.

But all epidemics and pandemics end sooner or later. They are followed by recovery.