At the end of 2019, many international organizations and economists predicted a slowdown in global GDP growth in 2020.
At that time, experts considered trade wars, geopolitical conflicts and an increase in debt burden to be the main risks for the global economy.
However, 2020 exceeded all the expectations of experts.
The global economy has faced one of the largest collapses in history as a result of the fallout from the coronavirus pandemic.
The first cases of COVID-19 were recorded back in December 2019 in the Chinese city of Wuhan.
In February 2020, the number of cases in China approached 80 thousand, but the introduction of strict epidemic restrictions allowed the country's authorities to stabilize the situation by March.
At the same time, the infection managed to spread outside the PRC, and in early spring the number of infected people began to grow rapidly around the world.
On March 12, the World Health Organization (WHO) announced the beginning of a pandemic, after which states began to massively restrict international transport links and introduce quarantine measures.
“It was the lockdowns that caused the greatest economic damage.
In a number of cases, it was possible to observe either a ban on conducting activities in certain industries, or a complete halt of the economy due to the restrictions imposed, "said Alexander Abramov, head of the laboratory at the Institute of Applied Economic Research of the RANEPA, to RT.
According to him, the pandemic has caused the greatest damage to countries whose economies are mainly based on small businesses and services.
So, in the second quarter, the GDP of the EU countries collapsed by 11.3% compared to the same period in 2019, the UK - by 20.8%, and the US - by 31.4%.
The drop in indicators has become the largest over the entire time of observations.
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According to the estimates of the international investment bank JP Morgan and the analytical agency IHS Markit, in April the level of business activity in the world dropped to a minimum since the financial crisis of 2008-2009.
In May, the figure began to rise moderately as the pandemic weakened and the restrictions were partially lifted in several countries.
Meanwhile, recovery in activity slowed down in the fall due to the onset of the second wave of COVID-19.
According to Johns Hopkins University, at the moment the number of recorded cases of coronavirus in the world is close to 80 million.As experts of the International Monetary Fund (IMF) believe, as a result of the pandemic in 2020, global GDP will decrease by a record 4.4%, and in the next five years the global economy will miss $ 28 trillion.
Oil storm
Experts interviewed by RT call the outgoing year one of the most difficult for the oil industry.
So, even before the start of the pandemic, participants in the commodity market were seriously alarmed by a sharp aggravation of relations between Iran and the United States.
As a result, global investors began to fear possible interruptions in oil supplies from the Middle East, and prices for raw materials rose sharply - from $ 65-66 to $ 71-72 per barrel.
However, as the coronavirus spreads in the world, the introduction of lockdowns and the closure of borders, global fuel consumption began to decline rapidly.
Against this background, at the end of February, the price of Brent crude oil fell below the psychological mark of $ 50 per barrel.
“The closures of countries and tough quarantine measures, first in Asia and later in the West, have interrupted global production and supply chains.
The demand for oil collapsed, which led to a drop in prices, ”Andrei Maslov, an analyst at the Finam Group of Companies, recalled in an interview with RT.
As expected, the countries participating in the OPEC + oil production freeze deal, including Russia, were to further reduce the production of raw materials and thereby stabilize the market situation.
However, on March 6, following the meeting, the parties could not agree and decided to completely abandon all previously assumed obligations.
“The Russian side proposed to extend the agreement on current terms at least until the end of the second quarter in order to better understand the situation with the impact of the coronavirus on the world economy and oil demand.
Despite this, the OPEC partners made a decision to increase oil production and fight for market share, ”the Russian government’s statement published on March 9 said.
The collapse of the OPEC + deal triggered the largest price shock in the history of the oil market.
The increase in production by exporting countries and the continuing collapse in global demand have led to almost full utilization of the world's oil storage facilities.
As a result, it became physically impossible to carry out new supplies of raw materials.
The situation turned into the fact that in the middle of spring, the price of Brent oil fell to a minimum in 21 years and at the moment fell below $ 16 per barrel.
In turn, the cost of raw materials of the American grade WTI for the first time during the entire period of trading fell to negative values.
So, on April 20, the contract for the supply of this brand of oil fell immediately by 300% - from $ 18 to minus $ 37.6 per barrel.
Thus, manufacturers were willing to pay buyers themselves for the supply of their raw materials.
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The collapse of the oil market forced exporters of raw materials to return to the negotiating table and resume cooperation.
On May 1, OPEC + members again began to reduce oil production, and the demand for energy began to gradually recover as quarantine restrictions were lifted in a number of states.
As a result, in early June, the price of Brent rose above $ 40 per barrel, and exceeded $ 50 in December.
“The recovery in oil prices was due to the vaccine race.
In late November - early December, the market reacted extremely optimistically to messages about the registration of drugs for coronavirus and the start of vaccination in different countries.
It is expected that vaccination should lead to the end of the pandemic, and, consequently, to the restoration of supply chains and demand for fuel, ”explained Andrey Maslov.
Credit chasm
The economic downturn amid the pandemic has led to an unprecedented rise in global debt.
According to the specialists of the Institute of International Finance (IIF), from January to October, the corresponding amount increased by $ 15 trillion and exceeded $ 272 trillion.
According to the organization, at the moment the volume of debt is more than three times the size of the global economy.
“When countries introduced lockdowns, governments were forced to compensate for the loss of business and population.
In addition, the state supported the demand for products at the expense of the budget.
All this contributed to the growth of debt, ”explained Alexander Abramov.
The largest debtors in 2020 were mainly developed countries.
So the highest volume of debt was recorded in the USA (almost 384% of GDP), the eurozone (416%), Great Britain (501%) and Japan (633%).
According to the IIF forecast, by the end of 2020, the world debt can reach $ 277 trillion.
However, the organization's specialists do not exclude that the indicator may be even higher.
“We would not be surprised if the figure exceeds our initial forecast by the end of the year.
High levels of debt make many countries more vulnerable to possible shocks in the future and, in some cases, contribute to strong macrosocial imbalances, ”said Emre Tiftik, director of research for sustainable development at IIF, to RT.
Russia's total debt has also grown significantly since the beginning of 2020 - up to 144% of GDP.
However, the indicator is still significantly lower than in most countries.
“Russia has traditionally pursued a tough fiscal policy, limited spending and avoiding deep budget deficits.
In addition, the state has significant financial reserves in the form of the NWF and gold and foreign exchange reserves.
This eliminates the need to significantly increase debt, ”explained Alexander Abramov.
Investors against the dollar
In the face of a global economic downturn, world central banks intervened in the situation.
So, for example, to support the American economy in March, the US Federal Reserve System began printing dollars in unlimited quantities and pumping up the country's financial system with new money by purchasing government bonds.
According to experts, an increase in the money supply in the economy should help to increase the rate of GDP growth.
At the same time, this policy of the FRS provoked a record weakening of the dollar in the world market.
Since the end of March, the corresponding DXY has plunged more than 12% and dipped below 90 points in December.
This happened for the first time since April 2018.
“During the crisis, the dollar money supply increased by more than 20%.
Such dynamics undermined investor confidence in the American currency as one of the main protective assets, ”Alexei Kirienko, managing partner of EXANTE, told RT.
The European Central Bank (ECB), as well as other regulators of developed countries, began to pursue a similar policy to pump the economy with money.
Against this background, inflationary risks have intensified in the world, and investors began to massively buy gold to more reliably save their funds.
As a result, by August the price of the precious metal had renewed its historical maximum and exceeded the level of $ 2 thousand per troy ounce.
“Gold has traditionally been one of the most important defensive assets due to resource constraints.
Since 2020 has become one of the worst in recent decades for the global economy, interest in the precious metal has increased significantly, ”explained Andrey Maslov.
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It is noteworthy that in addition to gold, investors began to actively invest in cryptocurrencies.
So, since the beginning of the year, the price of bitcoin has more than tripled, and in December, for the first time in its history, exceeded $ 24 thousand.
“Simultaneously with the weakening of the dollar in the second half of the year, we also observe overheating of the global stock market.
According to some indicators, the stock market is currently overvalued more than before the Great Depression.
As a result, an unprecedented situation has developed: the shares of even large companies have now ended up in the category of risky assets, and cryptocurrencies have become defensive, ”added Aleksey Kirienko.
Hope for the future
According to the IMF forecast, in 2021 the global economy will face recovery growth.
Thus, the world GDP can grow by 5.2% at once, and in the coming years the growth rates will be kept close to 3-4%.
Meanwhile, the risks associated with coronavirus continue to pose a threat to economic activity, so countries need to introduce new financial support measures.
This was stated in November by IMF Managing Director Kristalina Georgieva.
“Countries have begun to gradually get out of the deep COVID-19 crisis.
However, the new wave of the spread of infection in many countries shows how difficult and uncertain the way up will be, ”the head of the fund emphasized.
According to her, the pandemic has claimed more than a million lives and resulted in the loss of tens of millions of jobs.
At the same time, the development of vaccines "gives hope for a victory over the virus" in the foreseeable future, Georgieva is sure.
"If vaccines are more quickly available for widespread use, this will result in faster economic growth in 2021, but, more importantly, will provide accelerated growth in the coming years," the head of the IMF quoted TASS as saying.