This page presents key findings from the latest MSTI data (September 2022). The next update is due in March 2023.

 

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The R&D response to the COVID-19 crisis: final estimates of R&D performance in 2020

As a group, OECD economies continued to increase investments in research and development (R&D) in 2020 despite the sharp decline in economic activity due to the COVID-19 pandemic. According to the latest data published in the OECD Main Science and Technology Indicators (MSTI) database, R&D expenditure in the OECD area grew by 1.5% in real terms in 2020. This figure revises downward the 1.8% increase reported in March 2022. While this represents a sharp slowdown compared to previous years when R&D was growing at ~5% annually, it marks the first time on record in which a global recession did not translate into a drop in R&D expenditures. This reflects how investments in R&D have been an integral part of the response to the crisis.

Since the global financial crisis in 2009, businesses have accounted for nearly three quarters of total expenditure on R&D performance in the OECD area and have been leading OECD R&D growth. However, the business sector trailed other sectors in terms of R&D expenditure growth in 2020. R&D in the Higher Education sector rose by 1.0%, while R&D expenditures in the Government sector increased by 2.8%. R&D in the business enterprise sector still managed to grow by 1.3% despite the pro-cyclical nature of R&D and adverse economic conditions.

 

Gross domestic expenditures on R&D by performing sector
Index 2007 = 100 (constant USD PPPs)

 

Real growth in R&D in the OECD area in 2020 was primarily driven by growth in the United States at 5%, in contrast with R&D expenditures in Germany and Japan, which declined at -4.9% and -2.7% respectively. In the EU27 area, business R&D performance was the principal reason for the aggregate fall in R&D. In other words, if European business R&D performance had been on a par with the United States, its overall R&D performance would have been more similar. The structure of business R&D in the EU is more concentrated in industries that have been more negatively impacted by the COVID-19 crisis, as noted further below. China’s reported R&D expenditure grew by 9.6% in 2020, a figure comparable with previous years. The implications for comparisons with respect to the United States depend on how figures in different countries are adjusted for differences in purchasing power (PPP) for R&D investments. If forthcoming revisions to PPP conversion rates turn out as on previous occasions, China’s R&D expenditure gap with respect to the United States would have remained stable, with China’s R&D expenditure at close to 74% of that of the United States.

 

Gross domestic expenditures on R&D, 2000-2020

 

OECD R&D intensity (a headline measure of domestic expenditure on R&D expressed as a percentage of GDP) rose from 2.5% in 2019 to nearly 2.7% in 2020. This increase was the combined result of exceptional real growth in R&D expenditure (+1.5%) and the major decline in real GDP (-4.4%). For most countries in which R&D expenditure declined in 2020, increases in R&D intensity rates can be principally explained by the drop in GDP. For this reason, shifts in R&D intensity within the context of the COVID-19 crisis should be interpreted with caution.

In the case of Germany, R&D intensity did not change in 2020 because similar falls in R&D and GDP offset each other. Across the OECD, Israel and Korea continued to display the highest levels of R&D intensity, at 5.4% and 4.8% of GDP respectively. China’s R&D intensity went from 2.2% to 2.4%. R&D intensity in the EU27 area increased from 2.1 to 2.2% of GDP.

 

R&D intensity in OECD countries and other economies