Economic Environment¹

The global economy recovered more quickly in 2021 from the previous year’s severe slump in economic activity than had been expected at the beginning of the year. Many governments’ aid programs and rising vaccination rates were key contributing factors to the recovery. Nevertheless, the economic upturn was repeatedly hampered by measures to contain the pandemic and supply chain disruptions.

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Global gross domestic product (GDP) grew by 5.8% year on year (2020: –3.4%). Industrial production expanded by 6.5% (2020: –3.0%). Global chemical production grew by 6.1% (2020: –0.1%). The average price for a barrel of Brent crude oil increased to $71 per barrel (2020: $42 per barrel).

Trends in the global economy in 2021

The recovery of the global economy varied from region to region in 2021. There were severe restrictions on public life in the first half of the year, particularly in Europe. In the second and third quarters, many Asian countries struggled with coronavirus outbreaks and took corresponding countermeasures. China maintained its zero-Covid strategy throughout the year and responded to the emergence of any infections with strict containment measures. In the United States, most restrictions were eased after the first quarter despite sharply rising infection numbers over the course of the year. The steady reopening of economies was facilitated by increasing vaccination rates. Vaccination rates increased significantly during the year in Western Europe and the United States, followed by the advanced Asian countries and China with some delay. Other advanced emerging economies, for example in South America, now also have high vaccination rates. In contrast, vaccination rates are still low in large parts of the poorer countries of Africa and Asia, as well as in Russia.

GDP rates in 2021 were strongly influenced by base effects. China’s GDP grew at a double-digit rate in the first quarter year on year. In the second quarter, the United States and the European Union then recorded very high growth rates. Global growth slowed down, however, in the second half of the year. Bottlenecks in global supply chains increasingly limited industry growth. Added to this were the dampening effects of very high energy prices and a further sharp rise in infection rates in individual countries.

Economic trends by region

In the European Union (E.U.), GDP grew by 5.2% (2020: –6.1%). At the beginning of the year, restrictions in stationary retail, hospitality, tourism, and the cultural and entertainment sectors negatively impacted economic recovery. In the course of the second quarter, the restrictions were successively relaxed as a result of falling infection rates. At the same time, the vaccination campaign, which got off to a slow start due to a shortage of vaccines, gained momentum. Due to base effects, GDP growth in the second quarter was in the double digits compared with the previous year. There was, however, also a significant upturn in the second and third quarters of 2021 compared with the first quarter, especially in European tourist destinations. In France (+7.0%), Italy (+6.4%) and Spain (+5.0%), GDP grew especially dynamically in 2021. By contrast, Germany was hit harder by bottlenecks in intermediate inputs for the investment goods and automotive industries. At 2.8%, Germany’s economy thus grew at a below-average rate in 2021. Despite lower vaccination rates and higher infection rates, growth in the eastern E.U. countries (+5.3%) was at a similar level to that in the western E.U. countries (+5.2%).

Despite the end of the Brexit transition period at the beginning of the year, the United Kingdom’s economy (2021: +7.5%) recovered substantially from its major slump in the previous year (2020: –9.4%). Rapidly rising vaccination rates, as well as the complete reopening of the U.K. economy from mid-July, contributed to this. However, the consequences of Brexit were felt over the course of the year, particularly due to the shortage of labor in logistics chains and skilled trades.

Russia’s GDP grew by 4.3% (2020: –2.9%). Increased oil and gas prices led to rising trade surpluses and bolstered growth, while high infection rates and lockdowns weighed on the economy.

Economic development in the United States was volatile. Government stimulus programs bolstered household demand considerably early in the year, which resulted in strong GDP growth in the first two quarters. However, due to the expiration of aid benefits and a further rise in infection rates coupled with increasing supply problems due to congestion in the country’s largest ports, growth in private consumption was more sluggish in the second half of the year. In total, GDP in the United States grew by 5.7% in 2021 (2020: –3.4%).

In the emerging markets of Asia, growth weakened significantly in the course of the year. China’s dynamic recovery that began in the previous year continued initially. However, mobility restrictions and selective lockdowns, even with only few occurrences of coronavirus infections, as well as more restrictive financing conditions in the construction sector, negatively affected domestic demand growth. In addition, energy was rationed. By contrast, export demand grew significantly. In total, the Chinese economy expanded by 8.1% (2020: 2.2%). Many other emerging markets in Asia, including India, Malaysia and Thailand, were forced to temporarily adopt restrictive measures to contain waves of infection. All in all, the region grew by 7.3% in 2021.

The economies of Japan and South Korea were also significantly impacted by the pandemic. Japan temporarily declared a state of emergency. Private consumption was thus only able to increase slightly. Although exports rose considerably, they were negatively affected by the decline in growth in China and supply bottlenecks in the automotive industry. Japan’s GDP only grew by 1.7% (2020: –4.5%). South Korea saw significantly higher growth of 4.0% (2020: –0.9%).

The South America region recorded a rapid economic recovery, supported by rising prices for agricultural goods and industrial raw materials. Domestic demand in some countries was, however, dampened by currency devaluations and rising inflation rates. Brazil was able to increase its GDP by 4.7% (2020: –4.2%), bolstered by a considerable rise in exports and investments as well as moderate growth in private consumption. Argentina’s economic output grew by a strong 9%, though the previous year’s decline had been significantly larger at nearly –10%. For the region as a whole, GDP rose by 6.8% in 2021, after a decline of approximately the same magnitude in the previous year.