In March 2022, the OECD made its annual update of the Main Science and Technology Indicators (MSTI). According to the latest results, R&D expenditure in the OECD area grew by 1.8% in real terms in 2020, the first time on record in which a global recession did not translate into a drop in R&D expenditures. By sector of performance, R&D in the Higher Education sector rose by 2.4%, while R&D expenditures in the Government sector increased by 2.7%. R&D in the business enterprise sector still managed to grow by 1.5% despite the pro-cyclical nature of R&D and adverse economic conditions.

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 -5.3% and -2.7% respectively. Unlike the OECD as a whole, for which business R&D increased in 2020, in the EU, business R&D expenditure decreased and it was the principal source of the aggregate fall in gross R&D expenditure (GERD). This is because 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. On the other hand, China’s reported R&D expenditure grew by 9% in 2020.

In relative terms, the 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 (+1.8%) and the major decline in real GDP (-4.5%). 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%.

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