STATUS REPORT 2021
1 Economic Environment In 2021, the global economy experienced an exceptionally strong upswing despite pandemic-related temporary lockdown measures in most countries. The upswing was characterised by massive upward trends in most major economies, thanks to extensive fiscal support – especially in the United States. In many developing economies, the positive impact of rising external demand and higher commodity prices was partly mitigated by slower progress on mass vaccination – often due to delayed vaccine availability – and a partial withdrawal of macroeconomic support measures. Among developing markets, China and India again showed better growth than other major economies. Globally, most industries performed well, but the service sector faced headwinds from the pandemic-related lockdown measures. Although labour markets recovered faster than during the global financial crisis, employment remained below pre-pandemic levels. Broad-based growth in the global economy was mainly driven by the recovery in private consumption and investment. Manufacturing suffered from supply chain problems, which were temporarily exacerbated by the obstruction of the Suez Canal in March 2021 and the closure of some major ports in China. Supply chain problems were another major driver of inflation in 2021. The steep rise in consumer goods prices, especially in the US, was a result of the huge surge in demand triggered by stimulus measures. Commodity prices also rose sharply, in many cases above pre-pandemic levels. Demand for oil remained high. Prices for metals and agricultural products increased significantly. Overall, real GDP increased by 5.9%1 globally. Of the major central banks, only the Bank of England raised its key interest rate in 2021. The US Federal Reserve (Fed), the Bank of Japan and the European Central Bank (ECB) left their key interest rates unchanged throughout the year. The central banks continued the bond-buying programmes they launched during the pandemic, but both the Fed and the ECB announced in the second half of the year that they would reduce their monthly purchase volume in future. The US economy performed very well in 2021. It recovered faster than most other developed economies thanks to more generous fiscal measures. High income growth boosted consumption. The unemployment rate fell significantly to 3.9%2. The American Rescue Plan Act passed in March 2021 supplied USD 1.9 trillion in additional fiscal assistance, bringing total fiscal support provided since the start of the pandemic to over one quarter of GDP – an unprecedented level in peacetime. In view of rising inflation, the Fed indicated that the expansionary monetary policy it had pursued since the beginning of the pandemic would soon come to an end. In December 2021, it announced that its pandemic bond purchases would end in March 2022. This paved the way for interest rate hikes after concerns about high inflation had already been expressed against the backdrop of a steady recovery in the labour market. By the end of 2021, the Fed had purchased more than USD 4 trillion worth of government bonds and other securities. US real GDP grew by 5.6% in 20213. The euro area also experienced a significant recovery with real GDP growth of 5.2%4. France, Italy and Spain performed better than Germany, which suffered much more from shortages of raw materials, semi-finished products and semiconductors, especially for the automotive industry. A shortage of construction timber hurt the German economy as well. Summer tourism benefited from less stringent travel restrictions. Households responded to the temporary easing of these restrictions 1 2 3 4
IMF: World Economic Outlook Update, January 2022: Rising Caseloads, A Disrupted Recovery, and Higher Inflation (imf.org) (Download on 16 February 2022) Bureau of Labor Statistics: The Employment Situation - January 2022 (bls.gov), Household Data, p. 8 (downloaded on 16 February 2022) IMF: World Economic Outlook Update, January 2022: Rising Caseloads, A Disrupted Recovery, and Higher Inflation (imf.org) (Download on 16 February 2022) IMF: World Economic Outlook Update, January 2022: Rising Caseloads, A Disrupted Recovery, and Higher Inflation (imf.org) (Download on 16 February 2022)
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