In 2020, the Covid 19 pandemic caused a recession in almost all countries worldwide. Overall, the worldwide gross domestic product (GDP) shrank by 2.7 percent. A study on the future development of the economy in Germany, Bavaria and the world, commissioned by the vbw - Vereinigung der Bayerischen Wirtschaft e. V. (Bavarian Business Association), shows: In 2021, the global economy is already recovering significantly with a plus of 5.2 percent. This means that globally the pre-crisis level has already been reached again. Some of the larger EU member states, including Germany, however, will need until 2022.
Different economic effects of the pandemic
In some countries, the recession in 2020 was significantly more severe than the projected recovery in 2021. This includes the large western EU member states (including Germany) and the United Kingdom. Other countries such as Switzerland, Poland or the USA will be able to recover from the recession already in 2021. South Korea and China even made it through 2020 without a recession. The main reason for the relatively rapid recovery of the global economy: the recession was not caused by structural imbalances, but by an exogenous shock. As soon as the trigger of the shock – the pandemic – is under control, the economy can resume its dynamic pre-crisis development.
Long-term growth of the global economy
Overall, global economic output is expected to grow by two-thirds between 2020 and 2040. China will probably make the largest contribution with 31 percent, followed by the USA with 18 percent and the European Union with 11 percent. However, the EU will have to position itself more confidently in the future in order to retain a significant role among its rivals China and the USA.
Germany in the long term
Until 2040, the German economy will grow at a moderate pace of 1.1 percent per year on average. This growth depends primarily on technological progress. Without technical progress – which is increasingly driven by digitalisation – the German economy would shrink in the coming decades.
Spotlight on Bavaria
In the past, economic growth in Bavaria has been stronger than in Germany as a whole. And Bavaria will continue to grow somewhat faster in the future (1.2 percent annually until 2040). Responsible for this difference are high-growth sectors that are particularly well represented in Bavaria, such as vehicle construction or the information and communication sector. In addition, Bavaria benefits from a more favourable demographic development. While the German population as a whole will shrink slightly from the mid-2020s, it will continue to grow in Bavaria until the mid-2030s.
Structural change continues
In Germany today, the goods and services produced are different than a few decades ago, and the labour force is largely employed in different economic sectors than it was back then – economic structures are subject to constant change. "By now, a large part of output and employment in our country is in the service sector. Nevertheless, in international comparison Germany and Bavaria are characterised by a strong industrial core," says Prognos project manager Johann Weiß. And structural change will continue in the future. The vbw Prognos Report takes a detailed look at the prospects for the 20 most important sectors.
The future of Bavaria's sales markets
Bavaria and Germany are closely intertwined with economies all over the world. Accordingly, the development of the domestic economy also depends on the economic development of the international markets. This is especially true for export-oriented industrial companies. Based on long-term forecasts, the vbw Prognos Report shows future trends and development prospects in 25 economies that are of particular importance for Bavarian foreign trade.
Summary report (website vbw, german language)
Authors: Jakob Ambros, Dr Michael Böhmer, Dr Heiko Burret, Dr Oliver Ehrentraut, Jan Limbers, Philipp Kreuzer, Heidrun Weinelt, Johann Weiß (project manager), Eva Willer
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