Important Developments in Global Economy in 2021

Nurmyrat Mommayev
Important Developments in Global Economy in 2021
The supply chain problem is one of the leading issues concerning global trade. (Photo: Reuters)

Some of the important developments of 2021 have deeply affected the global economy. Without exaggeration, COVID-19 Pandemic stands out as one of the most important developments in the world in the last year has been the Covid-19 epidemic and its consequences. The acceleration of vaccination around the world led to the revival in trade, resulting in the increase in demand.

Although there are many developments concerning the global markets, two important developments have deeply affected the global markets. The first of these is the supply chain disruptions, and the second is the increase in energy prices.

Supply chain disruptions

The supply chain problem is one of the leading issues concerning global trade. In other words, the pandemic has ceased to be just a health problem and has become a global supply chain problem. Due to the pandemic, serious problems were experienced especially in the supply of raw materials, which, in turn, led to disruptions in production. For example, the basis of chip shortage in the auto industry is the increase in demand due to COVID-19 in consumer electronics such as computers, tablets and mobile phones. In short, housing expenditures and consumption of electronic equipment due to work-from-home have increased. Consumption of electrical durable goods caused delays in chip supply, and production disruptions and price increases in some sectors such as auto industry.

Increasing energy prices

Since the first half of 2021, the freezing temperatures in the world's three largest liquefied natural gas (LNG) consumers – Japan, China and South Korea – increased the global demand for the fuel, and resulted in the LNG shortage with a subsequent price increases. The Natural Gas Price Index increased by 234.9% in the second quarter of 2021 compared to the same period of the previous year. This increase in turn led to the price increase in the overall energy commodities.

In the second quarter of 2021, crude prices were up 111% compared to the same period of the previous year. The recovery in global demand due to the relaxation of the pandemic restrictions, the increase in the COVID-19 vaccination rates, and the subsequent optimism of the economies towards a rapid recovery increased Brent crude oil prices to an average of $73.13 per barrel in June 2021. At the end of the year, a barrel of Brent is traded at $78.34 in international markets. At the same time, natural gas prices in Europe exceeded $1,700, and since the demand is not expected to decrease with the cooling of the weather, it is forecasted that the downward trend of prices will not occur in the short term.

Nurmyrat Mommayev,

PhD Candidate at Marmara University's Department of Political Science and International Relations in Istanbul, Turkey