Country Digest
Smith Research Fellows Staff
United Kingdom
Modest growth rates in real GDP from 2015 to 2019, with the unemployment rate below 5.1%.
Real GDP declined by 20.8% in the second quarter of 2020.
The pandemic hit the U.K. economy harder than other European countries.
Furloughs prevented a large rise in the unemployment rate at the start of the pandemic.
The economy operating with significant excess capital utilization.
The Bank of England has cut interest rates to 0.1% and increased its asset purchases by 450 billion British pounds since pandemic started. Bank of England plans to purchase 150 billion pounds of gilts in 2021.
The U.K. decision to leave the EU poses long-run challenge of reorienting itself toward other markets.
Uncertainty over Brexit has slowed business investment over the past three years. The uncertainty about Brexit and the impact of the pandemic contributed to a 31.4% decline in business investment in the second quarter of 2020.
France
Modest growth rates in real GDP from 2015 to 2019, with relatively high unemployment rate.
Real GDP declined by 18.9% in the second quarter of 2020.
France recorded a government debt equivalent to 98.10% of the country's Gross Domestic Product in 2019. In 2020 Q1, the percentage of government debt to GDP was 101.20%. -Amendments to French labor law were implemented in 2017 that make it easier for companies to hire and fire and decentralized pay bargaining. In 2018, France implemented reforms in vocational training and life-long learning.
Germany
Low growth rates in real GDP from 2015 to 2019.
The first outbreak of Covid-19 caused less economic damage on Germany than in many other Europe countries. Real GDP declined by 9.81% in the second quarter of 2020.
The capacity utilization has contracted between June and July of 2020
Domestic orders and new car registrations experienced major declines in 2020.
At the end of 2020, most economic indicators were negative, indicating the German economy has yet to fully recover.
From 2012 to the beginning of 2020, public debt has decrease sharply to just over 80%.
The government’s expenditures and debt are up from this time last year due to the Covid-19 emergency.
The European Central Bank expanded its asset purchase program in December 2020.
Italy
Italy's recovery from the euro crisis had been one of the weakest in the EU before the spread of the coronavirus, and the country's economy has been among the hardest hit in the bloc by the pandemic. Italy has never been able to surpass its 2008 GDP level of $2.4 trillion.
Unemployment has been relatively high from 2015 to 2020.
Real GDP declined by 18.01% in the second quarter of 2020.
Over half of the population between15 and 34 are not students and are not working.
Bloomberg’s Business Intelligence (BIE) predicts a deep recession ahead for Italy.
Debt as a percentage of GDP is expected to increase to 159% this year.
The European Central Bank has bought up a large portion of Italian Government bonds in a effort to keep the country from defaulting in the short term.
Italy's export sector has declined significantly. Since, 2000, it has lost about 45% of its share of world trade.
Spain
Moderate growth rate in real GDP from 2015 to 2020 with declines in the unemployment rate from 20.9% to 13.78%
Real GDP declined by 21.5% in the second quarter of 2020 and the unemployment rate rose to 15.33%
As a result of COVID-19, the Spanish economy operated at 25% below capacity.
COVID-19 hit Spain very hard, especially the tourism industry, with a severe impact on the labor market.
To provide income through this crisis the Spanish government offered higher unemployment coverage and less strict restrictions to furloughed workers.
Bloomberg’s BIE report projects a debt-to-GDP ratio of 112% in 2021.
Russia
Moderate growth rate in real GDP from 2016 to 2020 with declines in the unemployment rate from 5.40% to 4.6%%
Real GDP declined by 8% in the second quarter of 2020 and the unemployment rate rose to 6.2%
Over the past three years, Russia’s population has declined.
Russia is ranked 43rd out of 45 European countries in the Economic Freedom index (EIF).
Bloomberg’s BIE reports that Russia’s recent trends in nationalism, declining population, state-owned business operations, aggressions towards neighbor countries, lack of transparency, and NATO withdrawal could lead to a recession.
India
Relatively large growth rate in real GDP from 2015 to 2018 with declines in the unemployment rate from 5.61% to 2.11%.
Modest growth rate in 2019, with unemployment rising 5.84%.
Real GDP declined by 23.92% in the second quarter of 2020.
India recorded a government debt equivalent to 69.62 percent of the country's Gross Domestic Product in the 2019-20 fiscal year.
India's inflation rate has been high since 2015.
The agricultural reforms have reduced state-imposed restrictions. The reforms are expected to increase private investment in agricultural infrastructure and provide a boost to the food processing sector.
In 2014, the government launched a “Make in India” program aimed at increasing the share of manufacturing from 15% to 25% of GDP. Structural reforms by the Narendra Modi Administration are starting to spur a turnaround.
Japan
Since 2012, GDP growth rate has been under 2%
Real GDP declined by 10.3% in the second quarter of 2020
Unemployment rate remained stable, below 3%, during the pandemic.
Japan provided two massive relief packages (117 trillion Yen in April and the same in May)
Japan promoted voluntary business shutdowns during the pandemic instead of mandatory.
Japanese companies prioritize employee interest over shareholder’s interests.
Inflation is at or near 0% for core goods with a concern of deflation in the Japanese Economy.
In 2019, Debt to GDP was 240%. However, as a result of the pandemic and lockdowns, Debt as a percentage of GDP is forecasted to increase to 268% in 2020.
Japan maintain the 2nd highest holdings of international reserves in the world.
New Prime Minister Yoshihide Suga has indicated a push on reforms, addressing such areas as technology shortfalls, escalating medical care spending, and overbanking in regional areas.
South Korea
High growth rate in real GDP from 2015 to 2020 with unemployment rate below 4%
A strong public health response and aggressive stimulus policy helped limit the economic damage from the pandemic shock. Real GDP declined by only 2.7% in the second quarter of 2020 and the unemployment rate rose to only 4.3%.
Country has relatively new and advanced infrastructure.
Percentage of debt-to-GDP is 47.3% in 2020.
Country is heavily investing in innovation.
Aging workforce is forcing South Korea to invest in productivity innovations.
Bloomberg Economics estimates potential GDP growth will decelerate to an average 2.2% through 2030.
China
Compared to earlier high-growth-rate periods, China experienced relatively modest rates in real GDP from 2015 to 2020 with a reported unemployment rate below 4%.
Real GDP declined by 6.8% in the second quarter of 2020.
China population of 1,439,323,776 is equivalent to 18.47% of the total world population.
Gradual re-openings of other economies are expected to bolster China’s economic recover.
The rise of protectionism demands has forced China official to consider shifting away from an export-led growth model towards a domestic-based growth model.
According to Bloomberg BIE reports, U.S. actions on TikTok and WeChat are not expected to have major impacts China’s businesses.
China's August activity shows the economic recovery is forging ahead.
Production growth signals the supply side continues to drive the rebound.
Recent increases in retail sales since the pandemic struck indicates that private demand is slowly rebounding.
China has made significant strides in developing its financial system over the past 20 years, developing a corporate bond market, relaxing controls on the capital account, and diversifying the financial sector.
Saudi Arabia
Modest to low growth rates in real GDP from 2015 to 2020 with the unemployment rate stable at 5.6%.
Real GDP declined by 6.99% in the second quarter of 2020 and the unemployment rate rose to 8.98%
2nd largest producer of Petroleum in the world and 5th largest producer of natural gas.
Saudi Arabia is facing potential declines in oil prices.Monetary Policy tied to the US Dollar.
Abraham Accords may eventually change Saudi Arabia position in the world.
Four million foreign workers left during the pandemic.
The ratio of debt to GDP has been increasing since 2015. In 2019, the percentage of debt to GDP was 22.8% and is expected to be 40% by the end of 2021 according to Bloomberg’s BIE.
Climate change has the potential to disrupt Saudi Arabia as the world shifts to cleaner sources of energy and away from oil.
Israel
Modest growth rate in real GDP from 2015 to 2020 with unemployment rate below 5%.
Real GDP declined by 7.97 % in the second quarter of 2020 and the unemployment rate remained below 5%.
Population has been growing at an average rate of 1.6% per year for a number of years, which some experts see as a potential problem of overpopulation.
Israel is deemed as the "Startup Nation." The nation has the highest density of startup companies of any country in the world. Large tech companies like Google and Microsoft conduct R&D in Israel.
Israel’s comparative advantages include: The government's role in innovation, creating unique technology solutions and opening new value chains, geographic concentration of institutions, and the chutzpah of the Israeli people.
Recently Israel has found offshore deposits of natural gas that meets domestic demand and recently been a new exported commodity.
Leading exports: Electrical machinery, equipment: $8 billion (13.7%); optical, technical, medical apparatus: $5.5 billion (9.4%); machinery including computers: $5 billion (8.6%); organic chemicals: $4.3 billion (7.4%); pharmaceuticals: $3.3. billion (5.7%).
Organic chemicals have grown over 200% between 2018 and 2019.
The Housing Market has increased by 2.7% year over year.
The Bank of Israel added $10 Billion to Crisis Bond-Buying Plan with the goal of providing a cheap line of credit for small businesses. The interest rate is historically low at 0.1%.
South Africa
Low to negative growth rates in real GDP from 2015 to 2020 with a high unemployment rate ranging from 24.5% to 29.10%
Real GDP declined by 53.59% in the second quarter of 2020.
South Africa's unemployment rate fell to 23.3% in the second quarter of 2020 from 30.8% in the third quarter.
In September, South Africa had the highest Covid-19 cases on the continent.
The country is experiencing a mass migration from its cities to more suburban and rural areas. From late March to late May, approximately 15 percent of South Africans (5 million to 6 million people) changed residences.
South Africa imposed two complete bans on the sale of alcohol this year.
South Africans experiencing rolling blackouts. Eskom, the state power monopoly, is struggling to generate enough electricity to meet needs.
South Africa has experienced one of the most significant capital outflows of all emerging markets over the last several years.
Nigeria
Low to negative growth rates in real GDP from 2015 to 2020 with a high unemployment rate ranging from 10.4% to 23.10%.
Real GDP declined by 3.62% in the third quarter of 2020 with the unemployment rate increasing to 27.10% in the third quarter.
Nigeria is the second largest economy in Africa: 206 million people, 250 different ethnic groups.
70% of government revenue is funded by oil exports.
60% of population is under the age of 24, with the average age being 18 and life expectancy of 55.
Over 10 million children are out of school—highest in the world.
Unemployment is expected to rise over next decade due to lack of education.
Declining international reserves resulting from declining oil prices has forced the central bank of Nigeria to devalue the naira. The naira/USD has increased from 199.3 in 2015 to 392 in 2020.
Canada
Modest growth rate in real GDP from 2015 to 2020, with the unemployment rate ranging between 5.63% and 7.07%.
Real GDP declined by 38.14% in the second quarter of 2020 and 40.52% in the third quarter, with the unemployment rate increasing to 13% in the second quarter and falling back to 10.03% in the third.
10th largest global economy.
Fastest growing population of the G-7 countries due to immigration policies
Brazil
Low to negative growth rates in real GDP from 2015 to 2020 with a high unemployment rate ranging from 8.9% to 13.7%
Real GDP declined by 10.9% in the second quarter of 2020, with the unemployment rate increasing to 13.3%.
Brazil Population is 212,559,417 with 87.6% of the population urban
Exports of goods and services declined 2.8% in 2020
Debt of 100% to GDP in 2020
Brazil Central Bank’s strategy for fighting the impact of the coronavirus has to been to inject significant liquidity in the banking system and to encourage banks to lend.
For the duration of the pandemic, the BCB has purchased public and private bonds in the secondary market
Mexico
Low to negative growth rates in real GDP from 2015 to 2020
Low unemployment rate below 4% from 2015 to 2020
Real GDP declined by 16.95% in the second quarter of 2020 with the unemployment rate increasing slightly to 4.78%.
The current population of Mexico is 129,299,186. The median age in Mexico is 29.2 years.
Mexico recorded a government debt equivalent to 45.50 percent of the country's Gross Domestic Product in 2019.
The Mexican economy is the 15th largest in the world.
Mexico’s biggest challenge is eliminating its drug cartels. After Colombia's crackdown, many of its cocaine operations moved to Mexico.
As of July 1st, the USMCA agreement went into effect.
Argentina
Low to negative growth rates in real GDP from 2015 to 2020
Unemployment rate ranging between 7.2% and 10.6% from 2015 to 2020
Real GDP declined by 19% in the second quarter of 2020 with the unemployment rate increasing to 13.10%.
The largest industries in Argentina consist of agriculture and food processing, appliances and electronics, textiles, and oil.
Argentina continues to experience high inflation.
In 2019, its percentage of debt-to-GDP was 89.4% and is expected to reach 100% in 2020.
Argentina has been struggling with a recession since late 2017.
In August of 2020, Argentina restructure $65 billion of its debt with two of its largest creditors, Blackrock and Greylock Capital Management.
In May, Argentina defaulted on interest due for bond holders.
International reserves are low and the country has significant debt denominated in US dollars.
Argentina is expected to work out an agreement with the IMF to restructure more of it debt.
