Source of graphs: OECD
Rosstat published the first estimate of GDP for 2020: according to these data, Russia’s GDP contracted by 3.1%. Compared to most of the G-20 countries (some of them are just beginning to sum up the year), Russia weathered the consequences of the crisis softer, but failed to transform it into growth.
For Western countries (especially for the USA and Europe), the crisis always leads to a reduction in the size of the economy. In these countries, where the employment of resources in the economy is close to maximum, the crisis disruption of the economic cycle is rapidly turning into a drop in GDP. The tough reaction of European countries to the epidemic further exacerbated this decline.
In developing countries, the crisis followed different scenarios. Latin American countries operating in the American economic cycle have experienced problems in the past, and this crisis has led to even more serious economic losses. The GDPs of India and South Africa, which are highly dependent on the demand for low-tech goods from Western countries, have also fallen sharply. In addition, these two countries have had the most stringent quarantine measures among developing economies.
However, some developing countries were able to respond to the crisis better than their G-20 counterparts. Korea, a country with high-tech exports and a relatively quick response to the epidemic, managed to prevent a larger drop in GDP. China, mainly due to the strength of domestic consumption and a quick exit from the sanitary crisis, was able to return to growth, albeit not as high as before. Turkey, whose economy has been in decline for the past few years, due to the effect of a low base, it was possible to begin its recovery precisely in 2020, also due to the fact that the country did not impose serious restrictions.
The fall in the economy in 2020 had two components – economic (the severity of the realized losses in the most significant industries) and associated with coronavirus restrictions (how quickly and softly the restrictions were introduced). A number of states have successfully solved both components of the crisis (China, Turkey and Korea), some countries have failed to resolve any of the problems (some countries in Europe and Latin America), and others – only one of them.
Russia can be attributed to the latter group. The country’s economy was hit hard by the shocks in commodity markets, and state support programs were mainly aimed only at the social sphere, without due attention to the real economy. However, the easing of coronavirus restrictions since summer 2020 can be said to have prevented a more significant drop in GDP.
In the near future, the one who will most effectively solve the problems associated with both the pandemic and the economic recovery will benefit from the crisis. And given that the fall in GDP in 2020 was the strongest in the last 80 years, in 2021 we can expect rotations in the list of the largest economies in the world.
Author: Ilya Grigoriev