The global economy recorded negative growth in fiscal year 2020 due to the impact of the Covid-19 pandemic. Global demand for vehicles was lower than in the previous year. Amid these challenging market conditions, the Volkswagen Group delivered 9.3 million vehicles to customers.
GLOBAL SPREAD OF CORONAVIRUS (SARS-COV-2)
At the end of 2019, initial cases of a potentially fatal respiratory disease became known in Wuhan, in the Chinese province of Hubei. This disease is attributable to a novel coronavirus. Infections also appeared outside China from mid-January 2020. In Europe, the number of people infected rose continuously in the course of February, and especially in March and April 2020. While many European countries recorded declining numbers of new infections as the second quarter of 2020 progressed, the rate of new infections continued to rise in North, Central and South America, Africa and parts of Asia. In the second quarter, many of the measures taken to contain the Covid-19 pandemic were gradually eased, especially in Europe. This included partially lifting border controls and travel restrictions and easing lockdowns as well as the reopening of businesses and public facilities. In addition, the European Commission and numerous European governments approved aid packages to support the economy. In other regions, too, governments introduced measures aimed at shoring up the economy to counteract the enormous disruption to everyday life and economic activity caused by the Covid-19 pandemic. During the third quarter, and particularly during the fourth quarter of 2020, many regions outside China and around the world saw a renewed – and in some cases very rapid – increase in new infections, which led to the easing of restrictions being reversed in certain situations.
Throughout the whole of 2020, the global spread of the SARS-CoV-2 virus brought enormous disruption to all areas of everyday life and the economy.
DEVELOPMENTS IN THE GLOBAL ECONOMY
The global spread of the SARS-CoV-2 virus, the associated restrictions, and the resulting downturn in demand and supply meant that growth in the world economy was negative in 2020, at −4.0 (2.6)%. The average rate of expansion of gross domestic product (GDP) was far below the previous year’s level in both the advanced economies and the emerging markets. At country level, performance in the reporting period depended on the extent to which the negative impact of the Covid-19 pandemic was already materializing. The governments and central banks of numerous countries responded in some cases with substantial fiscal and monetary policy measures. This meant cuts in the already relatively low interest rates. There was a significant drop in prices for energy resources, while other commodity prices increased slightly year-on-year on average. On a global average, consumer prices rose at a slower pace than in 2019, and global trade in goods declined in the reporting period.
At −7.2 (1.3)%, the economies of Western Europe as a whole, recorded a sharp fall in growth in 2020. This trend was seen in nearly all countries in Northern and Southern Europe. The impact of national measures to contain the pandemic, including border closures and physical distancing, caused deep cuts. In some states, the measures severely restricted everyday life and also had grave economic consequences. Governments of many countries in this region subsequently started to lift some of the restrictions imposed, spawning a gradual economic recovery.
Due to the renewed increase in case numbers in many countries as the year went on, several of these measures were tightened again, or at least left in place. In addition, the uncertain outcome of the Brexit negotiations between the United Kingdom and the European Union (EU) generated uncertainty in fiscal year 2020, as did the related question of what form this relationship would take in the future.
The economies in Central and Eastern Europe reported a marked decline in the real absolute GDP in 2020 at −3.7 (2.5)%, with economic output falling by −3.4 (2.9)% in Central Europe and by −4.0 (2.0)% in Eastern Europe. The same trend was observed in Russia; economic output in Eastern Europe’s largest economy contracted by −4.1 (1.3)%.
Turkey was unable to sustain the recovery seen in the first quarter, with GDP growth declining to 0.2 (1.0)% for 2020 as a whole but remaining in positive territory. South Africa’s GDP trend declined sharply in the reporting period to −7.3 (0.2)% amid persistent structural deficits and political challenges.
Germany’s economic output showed a significantly negative trend in the reporting year at −5.3 (0.6)%. The labor market was in a favorable situation at the start of the year, but the pandemic led many companies to introduce short-time working (Kurzarbeit) throughout the course of the year. The temporary easing of restrictions in everyday life and economic activity as well as government assistance packages enacted to support the economy led to improved confidence among consumers and companies as the year progressed. However, it only occasionally matched the previous years’ levels.
US economic output declined by −3.6 (2.2)% in the reporting year as rates of infection soared. To strengthen the economy in light of the disruption caused by the Covid-19 pandemic, the US government passed comprehensive stimulus packages. The US Federal Reserve cut interest rates twice, alongside other measures to support the economy. The weekly number of people filing new claims for unemployment benefits rose by several million before declining but still remaining at a relatively high level. This was reflected accordingly in the unemployment rate, which more than doubled year-on-year to 8.1 (3.7)% in the reporting period. GDP fell by −5.7 (1.9)% in neighboring Canada and by −9.0 (0.0)% in Mexico.
Brazil’s economy recorded a decline of −4.6 (1.4)% in 2020, resulting from the dynamic rate of infection caused by the Covid-19 pandemic. At −11.1 (−2.1)%, the economic downturn in Argentina intensified amid continued high inflation and substantial depreciation of the local currency compared with the previous year.
The Chinese economy, which had been exposed to the negative effects of the Covid-19 pandemic earlier than other economies and benefited from a relatively small number of new infections as the year progressed, recorded positive growth rates from the second quarter onwards, expanding by 2.1 (6.1)% overall. Growth in India fell sharply to −8.9 (4.2)% amid relatively high infection rates. Japan also recorded negative growth of −5.4 (0.3)% compared with the same period of the previous year owing to the negative impact of the Covid-19 pandemic.