Economic environment in 2014
We expect the following developments in 2014:
- Global economic growth at 2.8%, only somewhat faster than in 2013 (+2.3%)
- Global economy continues to face substantial risks
- Currency volatility remains high in emerging markets
- Bottoming out and weak growth of gross domestic product in European Union (+1.0%)
- U.S. growth at 2.5%, slightly up from prior year; growth in Asia (excluding Japan) at prior-year level (+5.8%); somewhat slower growth in China (+7.0%); stable growth in Japan (+1.5%) and South America (+2.6%)
- Oil price to average $110 per barrel for the year
- Average exchange rate of $1.30 per euro
The global economy will likely grow by 2.8% in 2014, only somewhat faster than in the previous year (+2.3%). We expect growth to remain weak in the eurozone. The global economy will continue to face significant risks. At 4.4%, global chemical production will presumably grow at the previous year’s rate (+4.6%) due to the slower momentum expected for China. For 2014, we assume an average price for Brent crude oil of $110 per barrel and an exchange rate of $1.30 per euro. Exchange rate volatility in the emerging markets will remain high.
Outlook for gross domestic product
(Real change compared with previous year)
Trends in gross domestic product
(Average annual real change)
We expect the economy in the European Union to bottom out and grow slowly in 2014. While Germany, the United Kingdom, and the northern and eastern E.U. countries will presumably grow faster than one percent, we anticipate mostly stagnating economic development for the countries in Southern Europe. Our forecast anticipates a continuing reform and consolidation process in Europe and no renewed escalation of the sovereign debt crisis.
For the United States, we expect the overall economy to grow somewhat faster than in 2013. Economic uncertainty with regard to future austerity measures decreased following the settlement of the budget dispute. Low energy prices and continued improvement in the labor market will favor moderate growth of the U.S. economy.
Economic growth in Asia (excluding Japan) in 2014 is likely to match prior-year levels. Based on China’s economic policy to decrease dependence on investment and export, we expect growth there to be somewhat weaker. By contrast, we anticipate stronger growth on average in India and the other emerging markets due to increased competitiveness arising from the depreciation of their currencies.
Japan is expected to largely maintain its pace of expansion in 2014. Sales tax increases planned for the spring will dampen growth, but this will be partly offset by positive fiscal stimulus measures.
For South America, we assume that growth rates will remain around the same level as 2013. We anticipate greater, export-led demand owing to brightened global economic prospects. Domestic demand in Brazil will remain subdued as a result of inflationary tendencies and increasing interest rates.