Letter IEDI n. 1021–Global industry ranking under COVID-19
Up to May, the world industry lost 7.4% of its output in 2020, due to the COVID-19 pandemic, as shown last week by the most recent data released by the CPB (Netherlands Bureau for Economic Policy Analysis), which monthly tracks the sector's performance.
Although the falls have affected industrial parks in all regions of the globe either directly, due to isolation and social distancing measures in the areas most affected by the coronavirus, or indirectly, through the decline of economic growth and international trade, the impacts have been quite asymmetrical in intensity.
For the advanced economies as a whole, where the industry decreased 9.5% in Jan–May/20 compared to the same period of the previous year, the most affected region was the Euro Zone, with -13.6%. Among the emerging economies, whose industrial production fell 5.5% in the same period, Latin America presented the worst performance: -12.5%.
The severity of the health crisis and the effectiveness of government responses to strengthen health systems as well as to preserve jobs and the functioning of companies are important factors in explaining the differences in results.
In the case of Latin America, as international organizations such as the IMF and the World Bank had already warned, the challenge posed by the pandemic tends to be more serious, given: the high level of informality in their economies, making it difficult to adopt stricter social isolation measures; the limited capacity of their health systems; the dependence on the export of commodities and, in many countries, the important participation of foreign financing and tourism.
Another aspect causing differences in countries' industrial performance is that they are not all in the same phase of the crisis. Some have already controlled the most serious COVID-19 wave and have been on a path to normalize their economy for longer, as is the case in China. Others were able to act quickly and prevent the spread of the virus, such as Norway.
Some are beginning to relax lockdowns that were in place until recently, like many European countries. And there are also those who have not yet managed to obtain signs of a slowing-down in the number of cases and deaths from the coronavirus, as many Latin American countries like Brazil.
Despite the different moments that countries are facing, the figures for the first five months of 2020 indicate that only in very few of them has the industry managed to overcome the adverse effects of the pandemic. An IEDI survey of 43 countries shows that in 86% of the cases there has been a loss of production in the sector.
The data used are from the OECD, IBGE, Eurostat and the National Bureau of Statistics of China. In order for the sample size to be as large as possible, it was decided to work only with seasonally adjusted series, even though the comparisons drawn refer to the equivalent period of the previous year. Usually, the IBGE calculates the interannual comparisons from the series without adjustment.
It should also be noted that, due to the pace of release of industry data by the statistical research institutes of each country, in a few cases the calculation of the 2020 result was up to the month of April only.
Besides the vast majority of this group of 43 countries being in the red, more than half (58%) registered falls equivalent to or more intense than the -7.4% of the total world industry, according to the most recent CPB data. Two-digit drops were recorded by no less than 40% of the sample.
In the ranking built by the IEDI, Brazil, with -10.7%, appears in the group in the worst situation, but at least we are not at the bottom of the table. The Brazilian industry occupies the 30th spot and is ahead of countries such as the United Kingdom, Portugal, Germany, South Africa, Spain, France and Italy.
However, many of those below us in the ranking tend to accelerate in the coming months due to greater control over COVID-19's epidemiological curve and to the end of their lockdowns, as long as this does not bring new outbreaks. Brazil, in turn, is still seeing the coronavirus moving inland and the continuation of a high number of new cases.
In contrast, in the top positions are countries that more quickly controlled the pandemic, such as Norway (+4.4%) and South Korea (+0.7%). China's industry still shows a negative rate, but is in a path of rapid easing, as suggested by the reduction in the year-to-date figure from -8.5% in March to only -1.3% in June.