On February 2, 2021, the UN report World Economic Situation and Prospects 2021 was presented by the International Union of Economists (in the General Consultative Status with the UN Economic and Social Council) and the UN Information Center in Moscow with the participation of the Free Economic Society of Russia.
The presentation was attended by representatives of the UN Economic Commission for Europe and the UN Department of Economic and Social Affairs, leading scientists and experts from both Russia and abroad — from Bulgaria, France, Sweden, Great Britain, Turkmenistan, Azerbaijan, Belarus.
The presentation was moderated by Alexander Dynkin, Vice President of the International Union of Economists, President of the Primakov RAS Institute of World Economy and International Relations, Academician of the Russian Academy of Sciences.
The report was presented by Dmitry Belousov, Head of the Macroeconomic Analysis and Forecasting Department, Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF), and Alexander Apokin, Head of the World Economy Research Group, CMASF.
Director of the UN Information Center in Moscow Vladimir Kuznetsov stressed that the UN annually presents the report in many world capitals, and thanked the International Union of Economists, a partner of the UN Information Center in the General Consultative Status with the UN Economic and Social Council, for hosting the event in Moscow.
The report does not give reason for optimism — the current crisis carries risks for the development of healthcare, dealing with the climate agenda, and for the world economy as a whole, threatening everything that has been achieved in recent decades, said Mr. Kuznetsov. Sergey Bodrunov, President of the Free Economic Society of Russia and the International Union of Economists, agreed that
the report is full of anxiety about the prospects for world economic development. "The pandemic and related restrictive measures have paralyzed the global economy, shutting down entire sectors, ruining small businesses, leaving millions of people unemployed, exacerbating social inequality, and increasing global household debt. The world found itself in the grip of a pandemic on a scale never observed in modern history," noted Dr. Bodrunov.
According to the report, the global economy shrank by 4.3% in 2020. This is the most severe decline in global output since the Great Depression. By way of contrast, during the 2009 financial crisis, global GDP shrank by as little as 1.7%. "This is partly the result of a misjudgment of the 2020 risks," suggested Dr. Dynkin. "The pre-crisis risk assessment was focused on overemphasizing climate threats, and this shifted the attention of both governments and societies away from the real pandemic threat in early 2020."
Dr. Dynkin stressed that the World Economic Forum named climate threats among the first five global risks of 2020. The pandemic ranked tenth. "This asymmetry in risk assessment, in my opinion, is a very important lesson for us," concluded Dr. Dynkin.
Developed economies, where restrictive measures were introduced in the first place, were the hardest hit by the pandemic — these are the European nations and several states of the US. In developed economies, the GDP declined by 5.6% in 2020. According to UN forecasts, it is expected to rebound by up to 4.0% in 2021.
The G20, accounting for almost 80% of the global output, saw their GDP shrink by 4.1%. Among the G20 member countries, only China managed to record positive GDP growth in 2020.
World trade in goods and services, according to UN estimates, decreased by 7.6% in 2020. Tourism exports fell by 70%, leaving the tourism industry with a loss of approx. US$ 1.1 trillion. The developing countries of the Caribbean, whose economies are focused on the tourism sector, have been hardest hit. The pandemic has also increased inequality, with 131 million more people living in poverty globally.
"About 80% of the Earth's economically active population suffered to some degree from quarantine measures. In the OECD countries, unemployment rose to an average of 9% in the middle of lockdowns. By the end of 2020, the situation improved slightly: unemployment dropped to 7%. In developing countries, the situation was much worse. Unemployment ranged from 27% in Nigeria and Jordan to 10-13% in Latin America and some Asian countries. One should take into account that the UN report was prepared in the fall and thus does not include the second wave of lockdowns, which we are already seeing in some countries, and the deterioration of the pandemic situation," said Dr. Apokin.
Speaking about the situation on the world labor market, he stressed that the pandemic primarily affected people employed in low-paid, low-skilled jobs, and women, 50% of whom traditionally work in the sectors of the economy most affected by restrictive measures.
According to UN forecasts, the global economy will grow by 4.7% in 2021, which will barely compensate for the downturn suffered in 2020. "Recovery will be very uneven among economies. It will take several years before this gap is closed. Many countries, even if favorable conditions persist, will fail to recover in 2021 to their 2019 levels. Recovery will continue in 2022 and 2023," said Dr. Apokin.
In connection with the spread of the coronavirus, many countries have taken unprecedented measures to support their residents and stabilize national economies. US$ 12.7 trillion was spent on emergency measures to stimulate the global economy, with developed countries standing for 80% of that spending.
"Japan, the United States, most of the European Union — in particular, Germany — account for more than half of the total spending," explained Dr. Apokin. "We have to understand that those were unprecedented stimuli. Nevertheless, the effect largely stayed within the developed economies and was far from everywhere converted into aid to developing economies through international trade. UN experts rightly point out that this has created significant challenges, including those expected in 2021."
Funding of public economic stimulus programs led to the highest ever borrowing in peacetime, increasing public debt worldwide by 15%, i.e. by nearly US$ 10 trillion.
"The UN draws attention to the formation of bubbles in the financial markets. Taking into account the circumstances that we have observed in the past two weeks, we can say that the liquidity created during 2020 has largely failed to reach the real sector," said Dr. Apokin.
"Rising debt burdens in middle-income countries have the potential to have spill-over effects in emerging market economies," added Mikhail Golovnin, First Deputy Director for Research at the Institute of Economics, RAS. "We've seen this happen on multiple occasions already."
Alexander Daniltsev, Director of the Institute for Trade Policy at the Higher School of Economics, drew attention to the growing technological inequality and the need to develop international rules that would regulate interaction in the digital domain. "Without this, the world will not be able to develop normally. Everyone knows the term "digital gap". We propose the term "regulatory gap" because technological problems can be solved faster than regulatory ones," explained Mr. Daniltsev.
In 2020, the Russian economy faced three shocks at once. Firstly, the coronavirus pandemic, secondly, a fall in oil prices, and thirdly, a fall in demand for Russian exports due to a slowdown in the global economy.
By the end of 2020, the Russian economy shrank by 3.1%, according to Rosstat. "We are entering a period of stagnation with very slow growth. There was a period of recovery — mainly in the third quarter — but now the growth momentum is weak. Hopefully, if we manage to implement national projects, the growth will accelerate. The crisis hit the labor market the hardest. However, there are visible signs that the worst is behind us, partly due to the outflow of migrants, partly due to economic recovery," said Dmitry Belousov.
He noted that forecasts for the recovery of the Russian economy depend on both the world economy and the pandemic.
"The key question is whether the pandemic crisis will end in the first half of 2021 or in the worst case scenario linger on well into 2022," said Dmitry Belousov. "If the pandemic takes hold, we will most likely see another year of zero global growth, or even recession, with low oil prices, and, most importantly, a debt crisis will be triggered in the developing countries. This will inevitably affect the world economy and Russian economy — both investment activity and public spending, which will be forced to retain its anti-crisis, stimulating character. In this case, Russia's GDP growth will be at 1%. It all depends on the extent of stimulus packages. In principle, we can achieve a growth of roughly 1.5-2% in the medium term in the baseline scenario".
According to Alexey Vedev, Head of the Financial Research Laboratory at the Gaidar Institute for Economic Policy, the growth of the Russian economy in 2021 will be under 2%. "As before, the main diagnosis for the Russian economy is stagnation," consented Mr. Vedev. "I think that caution will prevail and private investment will be low."
Among the risks for the Russian economy, Alexey Vedev named a 30% increase in cash in circulation. "Imagine we have RUB 6-7 trillion extra cash, compared to our global peers. Another risk is a mortgage bubble. No matter how much bankers reassure us, a real threat to financial stability does exist."
According to Alexey Vedev, for a quicker recovery of the Russian economy, first of all, public investment should be increased — this will give confidence to private business and will revive the economy.
"When a significant part of the private sector is demoralized and lacks business confidence, the state has a special role to play," consented Alexander Nekipelov, Vice President of the VEO of Russia, Director of the Moscow School of Economics at the Lomonosov Moscow State University. "The solution to the problem could be large investment projects, both national and international, primarily in infrastructure, initiated by the government."
Sergey Ryabukhin, Vice President of the International Union of Economists, First Deputy Chair of the Committee on Budget and Financial Markets at the RF Federation Council, said that in order to counter new challenges related to the transformation of the international monetary and financial system, it is necessary to create a sovereign investment financial market and issue non-emission financial instruments backed by the economy's reserves.
"In our opinion, this will make it possible to raise long-term and cheap capital by non-emission means, while maintaining macroeconomic stability, to ease the fiscal and credit burden on businesses and residents," believes Dr. Ryabukhin.
Concluding the presentation, the moderator Alexander Dynkin noted that the UN sustainable development goals are hardly going to be met. "It seems to me that we need to start a discussion about what goals to set, because the pandemic has definitely served as an accelerator for many processes. I think that in a single year's time we moved to roughly the end of the 20s," explained Dr. Dynkin.
According to Alexander Dynkin, it's time to think about a new type of development. "I would call it 'responsible development'. The essence of this concept is that in production and consumption, we should focus more on intangible, renewable resources. I mean, first of all, intellectual resources. This, in my opinion, is one of the essential answers to the challenges that the world is facing today," concluded Dr. Dynkin.
Wrapping up the presentation, Sergei Bodrunov expressed confidence that the expert opinions voiced at the event would serve as a valuable source of information for economists, public decision-makers, and the general Russian public interested in economics alike.
"A holistic picture of global economic development trends and prospects presented by UN analysts is very important, especially in the current environment of uncertain economic prospects," said Sergey Bodrunov. "It is not easy to make forecasts, to identify optimal development alternatives in such a situation, but it is still important because those allow reducing economic uncertainty, which remains today the most important factor that creates additional obstacles for the post-recession recovery of both the global economy and national economies." Moderator: Alexander Dynkin
, Vice-President of the VEO of Russia, Vice President of the International Union of Economists, President of the Primakov National Research Institute of World Economy and International Relations at the Russian Academy of Sciences, Academician of the Russian Academy of Sciences, Doctor of Economics, Professor. Presenters: Dmitry Belousov
, Head of the Macroeconomic Analysis and Forecasting Department, Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF) Alexander Apokin
, Head of the World Economy Research Group and Lead Expert, Macroeconomic Analysis and Forecasting Department, Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF). Other contributors to the discussion: Sergey Bodrunov
, President of the Free Economic Society (VEO) of Russia, President of the International Union of Economists (IUE), Director of the Witte Institute of New Industrial Development, Doctor of Economics, Professor. Vladimir Kuznetsov
, Director of the UN Information Center in Moscow. Alexey Vedev
, Head of the Financial Research Laboratory, Gaidar Institute for Economic Policy. Alexander Buzgalin
, Vice President of the VEO of Russia, Presidium Member at the International Union of Economists, Director of the Institute of Socioeconomics at the Moscow University of Finance and Law, Professor Emeritus at the Lomonosov Moscow State University, Doctor of Economics. Jean-Louis Truel
, Associate Professor at the University of Paris-Est Créteil, Vice President of the Kondratieff Club. Mikhail Golovnin
, First Deputy Director for Research at the Institute of Economics, Russian Academy of Sciences, Corresponding Member of the Russian Academy of Sciences, Doctor of Economics Vladimir Milovidov
, Head of the Center for Socioeconomic Research, Russian Institute for Strategic Studies, Doctor of Economics David Lane
, Professor at the Academy of Social Sciences, University of Cambridge. Sergey Ryabukhin
, Vice President of the VEO of Russia, Vice President of the International Union of Economists, First Deputy Chair of the Committee on Budget and Financial Markets at the Federation Council of the Federal Assembly of the Russian Federation, Doctor of Economics Mikhail Ershov
, Presidium member at the VEO of Russia, member of the Coordinating Council of the International Union of Economists, Director for Financial Research at the Institute of Energy and Finance, Professor at the Financial University under the Government of the Russian Federation, Doctor of Economics. Alexander Nekipelov
, Vice President of the VEO Russia, Director of the Moscow School of Economics at the Lomonosov Moscow State University, Academician of the Russian Academy of Sciences, Doctor of Economics, Professor. Sergey Krasilnikov
, Vice President, Managing Director for International Cooperation and Integration of the Russian Union of Industrialists and Entrepreneurs. Boris Porfiriev
, Presidium member at the VEO of Russia, Director for Research at the Institute of Economic Forecasting, Russian Academy of Sciences, Academician of the Russian Academy of Sciences, Doctor of Economics, Professor. Alexander Daniltsev
, Director of the Institute for Trade Policy at the National Research University Higher School of Economics.
The presentation of the report were covered by the Public Television of Russia, TASS
, the magazine Volnaya ekonomika
, on the website of the UN Information Center in Moscow