World Economy: Results of 2020 and Prospects for 2021
The events that have taken place in the world make us think about the loss of the adequacy of the usual evaluative approaches and criteria. On the one hand, the results of 2020 look even somewhat joyful. Although the final statistics will be available closer to the end of the first quarter of 2021, the absolute majority of the world's analytical centres have significantly improved their own forecasts.
In particular, according to the conclusion of the IMF, the World Bank and the OECD, the world economy will end the past year with a decline of 4.4%, although in October-November, the Fund confidently spoke of at least a 4.9% total decline.
However, the average figure for the planet does not adequately reflect the situation. Some, for example, China, most likely managed to even ensure growth, approximately, to 2-2.3% for the year. While the combination of Brexit and COVID-19 led the British economy to fall by 9.8%. This is still a good indicator, compared with -11% in Italy and -10% in Spain.
European Commission experts generally expected a 7.75% EU collapse, but now they are correcting the forecast to -6%. They save the European Union: France - minus 4.1% and Germany - minus 4.2%.
Other significant countries include India (-4.5%), Brazil (-9.1%) and Mexico (-10.5%). Saudi Arabia showed an unexpected result. With a total dependence on oil and gas revenues, which fell critically due to the collapse of oil and gas prices in the first half of 2020, the Kingdom lost only 6% of its economy, which is significantly less than the results of the 24 countries of the EU.
However, the best of all, except for China, looks like the United States, which managed to lose even less, just -3.7%. But that's where the big questions start.
Over the past year, the Trump administration has knocked out of the Federal Reserve 9 trillion dollars worth of so-called “emergency anti-crisis measures”. If we take on faith the forecasts of the IMF and the US Treasury, it turns out that the Federal Reserve added another 9 trillion to the $21.4 trillion of US GDP for 2019, but at the output it received 3.7% less GDP than a year earlier. It turns out that the actual losses of the US economy amounted to $9.79 trillion, or 45.7% of GDP, but the failure was masked by large-scale “quantitative easing”.
However, the European Union followed a similar path, except not at such a high pace. While in the United States, the monetary authorities "drew" 41.6% of its economy, the European Central Bank urgently distributed to 724 European banks urgent aid worth €1.3 trillion, 8.8% of EU GDP.
This should also be added to the program of anti-crisis measures launched by the European Commission in the amount of €750 billion, €500 billion of which will be issued in the form of long-term loans "at a reduced rate", and €250 billion is free aid.
If we evaluate the result with this correction, then the overall decline in the European economy should be estimated at 16.2%.
Against this background, the Bank of Russia's expected decline of 4-5% (and Vladimir Putin announced 4%) is, firstly, significantly better than the previously expected minus 5-7%, and secondly, definitely better than the actual indicators of the United States and Europe. And it is manyfold better! Even taking into account the fact that Moscow, at a time of crisis, needed to “burn” part of the previously accumulated reserves, and even increase the public debt from 12 to 20% of GDP. For reference, the US government debt reached 98% of US GDP by the end of 2020.
In other words, this means that there are two important fundamental trends.
The first is that the tools that have developed over the past 30-40 years to assess the state, dynamics and nature of the economy are losing their adequacy to actual processes.
For example, in February–December 2020, US unemployment jumped from a historic low of 3.5% to 14.7% in May, and 28% by the end of the year. Instead of the usual 31,000 applications for unemployment benefits per week at the end of November, 742,000 such applications were filed in the United States. And the total number of registered unemployed alone has reached 20.3 million people, or just under one in three working-age Americans.
At the same time, formally, the scale of the economic downturn of the United States is presented as one of the smallest in the world. While the Russian result - a 4% decline, with an increase in unemployment to only 6.1% - is presented almost as proof that the country is “literally on the verge of death”.
The second trend is the increasing scale of compensation for economic losses due to managerial mistakes and defeat in market competition through unjustified emissions, which we are not yet able to oppose.
Moreover, Russia has to accept the devaluation of the ruble in order to maintain the necessary economic efficiency of foreign trade. In April 2018, the dollar was quoted at 62-65 rubles, to reach 68 in July 2019 and, from February 2020, when Western economies began mass injections, to reach 81 rubles per dollar in the autumn of 2020. Today, the exchange rate has slightly strengthened, to 74 rubles, but still the compensation of Western games with money forced Russia to accept the depreciation of its own currency by 19.3%.
The conclusions from what happened are obvious. The shake-up that befell the global economy was not fatal for anyone, but it shook off the dust, revealing the seriousness of the changes that had taken place, and also showed that the general structure of economic processes in the near future will also begin to change.
The share of real production, both in the internal economic structure of the state and in the international division of labour, will become of key importance. A comparison of the results of the United States, Europe and China convincingly shows that the “superfluous” in the market are primarily various kinds of providers and auxiliary services, most of which are frankly redundant. Therefore, they can be reduced relatively easily.
Even in countries whose culture traditionally involves eating in cafes, their closure due to quarantine has not led to mass starvation of the population. Citizens in general calmly switched to cooking at home. Of course, waiters, bartenders and baristas were left without jobs and income, but where their share in the structure of the economy was not significant, GDP as a whole was not significantly affected. Conversely, where such segments formed a major part of the economy, the decline was most profound.
Consequently, it is possible to fight the emerging trend only through the expansion of material production. Moreover, the new living conditions have come in earnest and for a long time. This means that the interruptions are of a long-term nature, which allows us to use them to expand import substitution.
It is clear that Russia will not be able to immediately create in one year its own smartphones or laptops that are not inferior in competition, although it is also necessary to move in this direction, but it is necessary to recognise that mass foreign tourism has died seriously and forever today.
Statistics show that Russian tourists spend about $ 34-36 billion a year abroad. Most of them go abroad because of the too large difference in the level of service and the general consumer qualities of domestic tourism in Russia.
The length of the “warm shores” in our country is small, and in terms of facilities they are inferior even to the Turkish ones, and most other types of domestic tourism are in their infancy. How to dramatically improve this in an open border environment was previously a non-trivial problem. Now, when it is difficult to go abroad, and even frankly dangerous, completely different prospects open up for the development of domestic tourism.
And tourism is just one of the solutions here. The “remote work” that became an urgent emergency solution turned out to be a promising trend towards reformatting the entire structure of labour organisation, with the prospect of switching to a permanent basis.
This automatically implies an increase in the demand for the bandwidth of communication channels and an increase in the technical capabilities of data centres, the development of which can potentially make them attractive for remote data storage by foreign companies. Especially small ones, which risk being thrown out of the market by the wilful decision of the management of, for example, Google, which actually disconnected the social network Parler from the Internet, and the Amazon corporation refused to lease its data centres.
Similarly, in the coming year, it is advisable to make efforts to attract light industry enterprises to Russia, as well as to create comfortable conditions for the development of application programming in the country. Both for external orders, and in the direction of developing their own applications for the domestic market.
Upon closer examination, the crisis is creating a lot of new prospects that can be implemented even in the course of the year. The most important thing here is to understand that the key to success is the desire for import substitution in the production area and a constant increase in the level of industrial processing of Russian products as a whole.
The higher it is, the greater the overall income of the economy, the greater the demand for Russian goods on the foreign and domestic markets, the higher labour productivity, which means the real income of the population, and the less dependence there is on crisis phenomena.