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2020, the World Economy Has Gone Through Like This

Source:Iris Liang Time:2020-12-29 16:14:31

In 2020, the sudden outbreak of new coronary pneumonia caused mankind to experience the most serious infectious disease pandemic in a century. The already fragile world economy has fallen into recession, and trade and investment have fallen sharply. The impact has exceeded the 2008 international financial crisis.

At the beginning of the outbreak, the economies of all countries in the world were generally severely impacted. The chief economist of the Organization for Economic Cooperation and Development (OECD) Laurence Bona once used "the world is experiencing the biggest economic recession since World War II" to describe its severity.

Entering the third quarter, global trade gradually recovered, container throughput and manufacturing export orders began to increase, and the world economy showed a momentum of recovery. However, due to the different effects of epidemic prevention and control in different countries and regions, the recovery of countries and regions is showing a divergent trend.

China has achieved significant results in coordinating epidemic prevention and control and economic and social development, becoming the only major economy in the world to achieve positive growth in 2020.

The United States, Japan, and Europe have gradually resumed work and production after the relaxation of blockade control measures. Together with the stimulus measures, both supply and demand have rebounded. However, the epidemic continues to disrupt the economic recovery process, and the negative impact is far from eliminated.

The vast majority of emerging economies and developing countries still face serious problems, including imperfect public health systems, weak economic foundations, and high debt pressures.

As the epidemic has not yet been effectively controlled globally, the epidemic situation of various countries, the degree of compliance of the people with epidemic prevention and control, government policy strength, consumer and business confidence, etc. have all affected the economic recovery.

Looking forward to 2021, the world economy is expected to slowly recover from the epidemic. It must be emphasized that strengthening global cooperation and restoring confidence is the key to promoting world economic recovery.

Perhaps many years later, even if 2020 is not regarded as the beginning of the US economic power from prosperity to decline, it will be marked as a "year of drastic cooling" and recorded in the record.

In December 2019, the U.S. unemployment rate remained at a 50-year low of 3.5%, achieving employment growth for 10 consecutive years, and the U.S. economy entered a new year with a steady growth rate. Three months later, the style of painting changed. With the spread of the new crown pneumonia epidemic, the US economy was almost shut down, and most industries were shut down. The U.S. economy further plunged into crisis in April, with the number of unemployed reaching 20.5 million, and the unemployment rate soaring to 14.7%, the highest since the Great Depression in the 1930s.

Along with the overall suspension of work and business, the Fed hastily introduced a series of measures in an attempt to stabilize the US economy. After an emergency rate cut of 50 basis points, the federal funds rate was quickly reduced to close to zero, and then a number of loan support programs were launched. When U.S. debt was sold by other countries, money printing machines were widely used. Internally expanded the Fed’s balance sheet from 4 trillion US dollars to 7 trillion US dollars, tacitly realizing the monetization of the deficit. When 2021 is about to enter, the total US Treasury debt has exceeded 27 trillion US dollars.

The huge amount of money printing has made the US housing market extremely hot. The situation of more money and less house is difficult to alleviate. Relevant reports show that the number of homes for sale has fallen to the lowest level in history, and residential prices have climbed to the highest level in history. With the support of the Federal Reserve, the rich took the opportunity to buy real estate, while companies rushed to issue bonds, setting a record high. Buying assets means dumping dollars. This green ticket, which has been popular in the world for many years, is facing continuous downward pressure.

Citigroup predicts that as foreign investors take action to protect their existing US assets from exchange rate fluctuations, the U.S. dollar may fall another 20% in 2021. Analysis believes that due to the overvaluation of the US stock market, interest rates do not follow inflation, and the global economic growth rebound, these factors will suppress the dollar. Investors may sell US assets to buy other assets.

The long epidemic has also further dimmed the employment prospects in the United States. According to data released by the US Department of Labor, the number of new jobs created in November was 245,000, the slowest recovery so far. With the tide of unemployment, American household consumption is sluggish. During the epidemic, physical store traffic decreased, which offset the impact of increased online shopping.

There is no doubt that this winter in the United States will be long and cold, and the rapid cooling of the US economy is hard to stop.

SEKO Machineryhas experienced a hard year. But thanks to the support of our old customers, we have survived this extraordinary year. Although the pace of progress was forced to slow down. But this will not hinder us from continuing to provide customers with innovative pipe making processes. In this year, we developed a powerful IoT technology for the intelligent stainless steel industrial welded pipe production line. This allows our engineers to better assist users in daily equipment maintenance and adjustment of production processes, helping customers greatly reduce equipment maintenance costs. 2021 is coming soon, and I hope that everything will gradually recover in the new year.

  European Union: a long and tortuous recovery

In 2020, the new crown pneumonia epidemic raged around the world, and the European Union became the hardest hit area. At the same time, the epidemic will aggravate the socio-economic problems of EU member states, increase the contradictions and differences within the EU, and even threaten the process of EU unity and European integration.

The new crown pneumonia epidemic in Europe broke out in March, and most countries implemented blockade measures from mid-to-late March to the end of April. As the epidemic spread, the European economy immediately fell into a sharp decline. The European Union’s autumn economic forecast report released in November believes that the euro zone’s economy will decline by 7.9% this year and will begin to recover next year.

The structural impact of the epidemic on the EU economy is far-reaching, such as rising government debt, increasing fiscal deficits, weakening investment and consumer confidence, etc., will make the EU economy suffer a long-term downturn.

The biggest problem facing the European economy is unemployment. McKinsey Consulting conducted a survey of nearly 2,200 companies in Germany, France, Italy and other countries and found that if the situation continues to deteriorate, in the next six months, Europe will usher in a serious wave of bankruptcy, and 10% of small and medium-sized enterprises will go bankrupt. This means that nearly 90 million people will lose their jobs.

In response to the impact of the new crown pneumonia epidemic on employment and the economy, the member states of the euro zone generally implemented large-scale fiscal and financial expansion policies. According to data released by the International Monetary Fund (IMF), the Eurozone fiscal deficit ratio is expected to rise to 7.5% this year, and the government debt ratio to 97.4%, both hitting record highs.

Under the heavy pressure of the epidemic, the EU summit, after a "marathon-style negotiation", reached a 750 billion euro "recovery fund" rescue agreement, known as the strongest economic stimulus plan in EU history. At the same time, the European Central Bank launched an emergency bond purchase program, promised to defend the euro without restrictions, and assumed the role of "lender of last resort", which stabilized the euro area financial market; the European Commission quickly loosened fiscal discipline and national subsidy policies and used the EU's existing budget Relief measures were introduced to stabilize employment. Coupled with the 100 billion euros "Aid for Relief of Unemployment Risk in a State of Emergency" initiated by the European Commission, it has somewhat calmed people's doubts about the EU's ability to respond to crises and the effectiveness of its coordination mechanism.

  How will the European economic situation develop in the future?

First, the second wave of the epidemic blocked the recovery and increased uncertainty. The European Union report predicts that the economies of the 19 Eurozone countries are expected to shrink by 7.8% in 2020, and grow by 4.2% and 3% in 2021 and 2022, respectively. The economies of the 27 EU countries are expected to shrink by 7.4% in 2020, and grow by 4.1% and 3% in 2021 and 2022, respectively.

Secondly, this year the EU's deficit has increased significantly, and the fiscal deficit and public debt continue to expand. Among them, the euro zone government deficit rate will reach 8.8%, and it is expected that the euro zone’s total debt to GDP ratio will increase from 85.9% in 2019 to 101.7% in 2020.

Third, the EU's economic outlook is highly uncertain and there are downside risks. Of course, the EU's recovery package may give the EU economy a greater impetus than expected.

The superposition of the epidemic crisis and the geopolitical game has also exposed the vulnerability of the European Union to some extent. The epidemic has delayed the EU reform plan, severely damaged its economy, politics, and society, and profoundly challenged its governance model and development philosophy. At the same time, in the face of external pressure and various challenges, European powers have become more determined to seek strategic autonomy.

  Japan: Hard to deal with changes

The "epidemic + political situation" is a true portrayal of Japan this year. Japanese people generally expect that the government can do three things: control the epidemic as soon as possible, successfully host the Olympic Games, and the economy can truly rebound next year.

In August, Japan’s former Prime Minister Shinzo Abe resigned early due to health reasons. Abe Cabinet Secretary and Chief Cabinet Secretary Yoshihide Suga took over the “campaign” and almost inherited all internal and foreign policies of the Abe administration, and continued to rely on financial easing and fiscal easing. Investing in controlling the epidemic, stabilizing the economy, and seeking solutions to the social security problems caused by the declining birthrate and aging population; politically, the Japanese government continues to "the Abe policy without Abe." Following the Japan-Europe "Economic Partnership Agreement" (EPA), the "Regional Comprehensive Economic Partnership Agreement" (RCEP) with the participation of the three major Asian economies of China, Japan and South Korea was formally signed, bringing new hopes for expanding international economic cooperation.

At present, Japan's domestic economic situation is quite difficult. While the GDP equivalent annual growth rate fell by 2.2% in the first quarter, the second quarter and the third quarter fell by 28.1% and 22.9% respectively. The Japanese economy, which has just begun to rebound in the fourth quarter, has encountered a new wave of epidemics, and the situation is once again tight. According to the latest report of the Japanese government on December 18, the economic growth rate for the whole year of 2020 is expected to be -5.2%.

The fiscal measures of the Japanese government and the central bank's financial policies have slowed the economic downturn to a certain extent. By maintaining operating subsidies, rent subsidies, and working capital loans for small and medium-sized enterprises, and raising the standard of subsidies for employees to go out of business, the Japanese government avoided large-scale business closures and employee unemployment, which in a certain sense helped the economy recover after the epidemic. basis. However, the Japanese economy is still "scarred" and the employment situation is still grim.

In addition, the three largest supplementary budgets in history have caused huge fiscal deficits. According to calculations by the International Monetary Fund (IMF), as of the end of this year, Japan's government debt balance is as high as 2.66 times of GDP, and Japan's fiscal balance goal is increasingly remote. While maintaining the short-term financial negative interest rate policy and lowering the target curve of long-term Treasury bond yields, the Bank of Japan expanded its capital injection into the market.

Focusing on the economic restructuring in the post-epidemic era, the Yoshihide Suga government has taken the digital economy and energy conservation and emission reduction as new drivers of economic development. In addition, the Japanese government has decided to jointly prepare the third supplementary budget this year and next year's budget to accelerate economic recovery through a large-scale 15-month budget. The Bank of Japan also decided to extend the support plan for enterprises and local financial institutions that was originally scheduled to expire at the end of March until September next year. In particular, the Japanese government and the Tokyo Olympic Organizing Committee are determined to eliminate all difficulties and promote the postponement of the Tokyo Olympics for one year, which is expected to promote a V-shaped rebound in the Japanese economy next year.

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Iris Liang
SEKO Machinery & Technology Co., Ltd
E-mail: sales3@gdseko.com
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