Page 12 - economic report 2020

World GDP shrank 3.2%, but there was The major complexity and huge uncertainty in
major uncertainty throughout 2020. predicting how the virus would spread, with
the subsequent response from institutions and
economic agents, led to constant updating of
economic forecasts. Whereas on 20 January 2020, before the pandemic became global, the IMF
predicted global GDP growth of 3.3% for 2020, it made a historic update in April to -3.0% for the
same year. In October 2020, the same institution lowered the forecasts further and announced
that global GDP would shrink 4.4%. In the end, global GDP shrank 3.2% in 2020. This revision of
forecasts occurred in practically all economies, including Andorra, and demonstrates the major
uncertainty that marked this crisis.

Although all world economies have been deeply Developed countries suffer more
impacted by COVID-19, there are differences from the effects of COVID-19, due to
in how far GDP has fallen, mostly for two
reasons. Firstly, it depends how each country the prominence of the service sector.
managed the health crisis (health spending,
restrictions on movement, testing, etc.) and
the economic crisis (financial support for GLOBAL GDP GROWTH
businesses and the self-employed, protecting Annual variation rates at constant prices, in % Chart 1.1
workers’ incomes, etc.). The second factor
concerns the prominence of the service sector
within each economy, as it requires substantial
social contact, such as tourism, hospitality,
commerce and leisure. In contrast, economies
in which industry represents a higher ratio of
10
GDP were better able to survive the onslaught
of the crisis.

These factors explain why the impact of
COVID-19 was greater in developed economies, Emerging and developing Advanced economies
with a larger service sector. Specifically, the market economies
The external environment of the Andorran economy | I. The international economy
GDP of the advanced economies hit -4.6% f: IMF forecasts (July 2021).
in 2020, compared with -2.1% in developing
economies. Source: IMF.

As for developing and emerging economies, significant differences can be seen between the
region of Latin America and the Caribbean, where the impact of the pandemic was very high and,
for example, China, which, despite being the country where the virus originated, ended the year
with a positive GDP variation rate. Specifically, in 2020, the Chinese economy grew 2.3%, because
it managed to rapidly contain the spread of
The Latin American economies were the virus and supplied the rest of the world
heavily impacted by the COVID-19 at a time when industry was closed in many
crisis, while China ended the year with countries. On the other hand, the contraction
in economic activity in Latin America and the
positive GDP rates. Caribbean was among the most significant in
the world, as it hit -7.0%. In the case of the
Middle East and Central Asia region, the decline in GDP was 2.6% in 2020. The countries most
affected by the pandemic were those that most depend on oil exports (Iraq, United Arab Emirates
and Saudi Arabia), as oil prices plummeted in the first few months of the pandemic. Among the
developing countries of Europe is notably Russia, with a 3.0% fall in GDP, also greatly affected by
falling oil prices.