Economic Environment1

Global economic growth in 2020 was much weaker than we had forecast at the beginning of the year. In the first half of 2020, the coronavirus pandemic led to the worst economic slump since the Second World War. Following a recovery in the third quarter, economic activity in the fourth quarter was again disrupted by rising infection rates and government restrictions in many countries. Global gross domestic product (GDP) fell by 3.7% year on year (2019: +2.5%). Industrial production contracted by 4.0% (2019: +1.8%). Global chemical production declined by 0.4% (2019: +1.9%). The average price for a barrel of Brent crude oil decreased to $42 per barrel (2019: $64 per barrel).

Trends in the global economy in 2020

Global gross domestic product declined by 3.7% in 2020 due to supply-side disruptions and weaker demand as a consequence of the coronavirus pandemic. A sharp decline in economic activity in China in January and February was followed by similar downturns in the rest of the world from March onward. Many companies saw production impacted by government orders and disruptions in interconnected global value chains. Online purchases could not fully compensate for the drop in offline demand. Turnover also temporarily slumped in the tourism, hospitality and cultural sectors. The resulting losses led to a decline in income and intermediate demand in this sector. Swift and strong intervention by central banks and governments in this exceptional situation prevented the global economy and financial markets from collapsing. Following a dynamic upturn in the third quarter of 2020, rising infection rates from October onward again made restrictions on economic activity necessary, especially in Europe.

Gross domestic product

Real change compared with previous year

Gross domestic product (Real change compared with previous year) (bar chart)

1 All information relating to past years in this section can deviate from the previous year’s report due to statistical revisions. Where available, macroeconomic growth rates are adjusted for calendar effects. Figures for 2020 not yet available in full are estimated.

2 In the rest of this chapter, “E.U.” refers to the E.U. 27.

3 We define the emerging markets of Asia as Greater China, the ASEAN countries (Brunei, Indonesia, Malaysia, Myanmar, Cambodia, Laos, the Philippines, Singapore, Thailand, Vietnam), India, Pakistan and Bangladesh.

Economic trends by region

  • Strongest post-war decline in GDP
  • Deep recessions in the E.U. and North America, slight growth in China
  • Depreciation of exchange rates in emerging markets

In the European Union (E.U.), GDP contracted by 6.4% (2019: +1.6%). Europe’s southwest was especially hard hit: Hard lockdowns were ordered in response to high infection rates. GDP fell by 8.3% in France, 8.8% in Italy and even shrank by 11.0% in Spain. German GDP also declined significantly, but less sharply, by 5.3%. The smaller decrease reflected the fact that the export industry benefited from the recovery in China and that the downturn in private consumption was less pronounced. GDP declined by 9.9% (2019: +1.4%) in the United Kingdom as measures to contain infection rates were taken late, but were stricter and continued for longer. Following an economic slump in the spring and a dynamic recovery in the third quarter, the eastern E.U. countries again recorded a strong rise in infection rates. As a result, governments imposed new partial lockdowns, which negatively impacted the services sector in particular. Overall, GDP in the eastern E.U. countries decreased by 4.4% in 2020 (2019: +3.8%). In Russia, GDP declined by 3.1% (2019: +1.3%). Industrial production in Russia was weighed down by rising infection rates from mid-September onward, weak demand for energy commodities and cuts to oil production. This dampened the economic recovery that began in the third quarter, largely driven by private consumption.

Economic developments in the United States were very volatile. The crisis left its mark on the unemployment rate here, which jumped from 3.5% at the beginning of the year to 14.8% in April 2020. Personal incomes rose overall as unemployment benefits were significantly bolstered by state aid. As a result, spending on consumer goods remained largely stable, while there was a clear, temporary drop in consumption of services. In the second half of 2020, the easing of restrictions in many states led to a significant recovery and saw the unemployment rate halve. Overall, U.S. GDP fell by 3.5% (2019: +2.2%).

In the emerging markets of Asia, the impact of the coronavirus pandemic was mixed. Economic output in China dropped considerably as early as the first quarter of 2020. However, a dynamic economic recovery was already underway in the second quarter of 2020 and continued in the second half of the year. Industrial production and export demand recovered particularly quickly, while domestic consumer demand reacted only after a delay. China was the only major global economy to report growth in 2020, of 2.3% (2019: +6.0%). In India, by contrast, GDP fell by 8.0% after a lockdown lasting several months (2019: +4.2%). Here, too, a strong decline was followed by a clear upturn in the second half of the year. GDP in the remaining emerging markets of Asia declined by an average of 3%. There was considerable variation from country to country.

Japan and South Korea recorded comparatively low infection rates overall. However, these also saw a significant temporary drop in domestic and foreign demand. In Japan, GDP sank by 4.8% (2019: +0.3%). In South Korea, higher government spending and investment cushioned the decline in GDP to only –1.0% (2019: +2.0%).

South America was severely affected by the coronavirus pandemic. The Brazilian economy was bolstered by strong fiscal stimulus measures. Economic growth started to recover in the second half of the year after restrictions were eased in some regions. The increase in public debt and rising inflation rates led to a significant depreciation of the Brazilian real. Brazilian GDP decreased by 4.6% (2019: +1.4%). Argentina saw a much stronger decline in economic output in 2020, falling by 10.4% as a result of a strict lockdown in the spring (2019: –2.1%). The country’s renewed debt crisis left little room for government aid. Inflation rates of over 40% negatively impacted private consumption and the Argentine peso lost around half of its value. Exchange rates in the rest of South America remained more stable. GDP losses due to lockdowns and weaker export demand varied significantly and were between –4.8% in Uruguay and –11.9% in Peru. Overall, GDP in South America fell by 6.6% (2019: +0.9%).4

4 Not including Venezuela