Economic environment in 2018

The global economy is expected to grow by 3.0% in 2018, about as fast as in 2017 (+3.1%). We expect economic momentum in the European Union (E.U.) to ease slightly. The United States will presumably grow at a slightly stronger rate. We anticipate a weakening of the high growth in China. This will probably negatively impact the Japanese economy as well. We forecast a continuation of the recovery already underway in Brazil and Russia. Global chemical production is forecast to grow by 3.4% in 2018, roughly at the same rate as in 2017 (+3.5%). For 2018, we predict an average price of $65 per barrel for Brent crude oil and an exchange rate of $1.20 per euro.

Trends in the global economy in 2018

  • Slightly slower growth forecast for the E.U.
  • Slightly stronger growth in the United States
  • Growth moderation expected in China
  • Continuation of recovery in Brazil and Russia

Growth in the E.U. is expected to slow slightly in 2018. Although the economy is in a cyclical upturn that is likely to continue in 2018, supported by low interest rates and moderate inflation, exports will be curbed by the comparatively strong euro and the weaker growth expected in Asia. We also anticipate a weakening of growth in the United Kingdom as uncertainty about the situation following the announced Brexit dampens investment and private consumers increasingly suffer from unclear labor market prospects and high inflation. Growth rates in the eastern E.U. countries are forecast to decline slightly after the strong upswing in the previous year. We expect the recovery in Russia to continue at roughly the same moderate pace as in 2017.

The United States should maintain its economic momentum, with slightly stronger growth compared with 2017. Early economic indicators point to a stable, positive consumer climate, which also reflects the strong labor market trend. Moderating effects will come from the financial market. Slowly rising interest rates should put more of a damper on consumer spending than in the previous year. By contrast, the corporate tax cut and the income tax reform passed in December 2017 will provide additional growth stimulus.

Outlook for gross domestic product 2018
(Real change compared with previous year)
Outlook for gross domestic product 2018 (Real change compared with previous year) (bar chart)
Trends in gross domestic product 2018–2020
(Average annual real change)
Trends in gross domestic product 2018–2020 (Average annual real change) (bar chart)

In the emerging markets of Asia, we expect economic growth to remain robust but slightly below the prior-year level in 2018. China should report slower but still strong growth: Government stimuli for the economy will probably be weaker and the financial markets will generally be more strictly regulated to prevent a further rise in corporate and consumer debt. Conversely, we are seeing slightly stronger growth rates in India. Here, the dampening effects of the introduction of a new sales tax system will presumably taper off.

For Japan, we anticipate a slowdown in 2018 after a year of unexpectedly high growth. In particular, China’s stimulating effect on Japanese exports is expected to weaken. However, the weak yen and the expansive fiscal policy will shore up the Japanese economy, meaning that the moderate upward trend is expected to continue.

We anticipate a continuation of the slow economic recovery in South America. In Brazil, demand for investment goods and durable consumer goods will presumably pick up slowly and export demand will develop solidly. We expect the Argentinian government to continue its path of reforms. Declining inflation rates should strengthen private consumption, and rising demand should also improve the investment climate.