Economic Environment

Global economic growth in 2019 was weaker than we forecast at the beginning of the year.1 Industrial production in particular remained well below our expectations. Against a background of high political uncertainty and mounting trade barriers, global gross domestic product (GDP) only rose by 2.6%, considerably slower than in 2018 (+3.2%). Growth in the industry as a whole declined at a much faster rate to only 1.5% (2018: +3.1%). As a result, growth in chemical production (excluding pharmaceuticals) was also considerably slower than in the previous year, at 1.8% (2018: +2.8%). The average price for a barrel of Brent crude oil decreased to $64 per barrel (2018: $71 per barrel).

Outlook on the economic environment in 2020

1 All information relating to past years in this section can deviate from the previous year’s report due to statistic revisions.

Trends in the global economy in 2019

At 2.6%, global GDP growth was significantly below the prior-year figure but remained only slightly below expectations at the start of the year (forecast: +2.8%) thanks to a stable services sector. Industry growth declined at a much stronger pace. The escalation of the trade conflict between the United States and China and the ongoing uncertainty surrounding the timing and nature of Brexit dampened demand for investment goods, consumer durables and their intermediates from the chemical industry. An accelerated structural transformation of the automotive industry also played a role.

Gross domestic product

Real change compared with previous year

Gross domestic product (Real change compared with previous year) (bar chart)

Economic trends by region

  • Weaker growth in the European Union and United States
  • Volatile, weaker economic momentum in China
  • Crises and low growth in South America

In the European Union (E.U.), GDP growth declined from 2.0% in 2018 to only 1.4%. Growth was weaker than in the previous year in almost all E.U. countries. The decline was especially pronounced in Germany (2019: +0.6%, 2018: +1.5%). Due to its high share of value added in investment goods and vehicles, Germany was particularly affected by the cyclical economic downturn, the political trade distortions and the structural transformation in the automotive industry. In Italy, GDP was virtually flat after growing by 0.7% in the previous year. The dampening effects were not as strongly felt in France (+1.3%) and Spain (+2.0%). Despite Brexit uncertainty, growth in the United Kingdom remained largely stable (+1.4%). This was mainly attributable to solid consumer demand in the public and private sectors; by contrast, exports and investments were weak. Despite their close integration in European value chains, the eastern E.U. countries posted much stronger growth than the rest of the E.U., at 3.7%. Rising real incomes, higher employment figures, low interest rates and increased government spending supported growth and offset the dampening effects on exports from western Europe. In Russia, by contrast, GDP growth slowed to only 1.3% (2018: +2.2%) against a background of restrictive monetary and fiscal policy, accordingly weak domestic demand and low export growth.

Growth in the United States weakened over the course of the year but remained at a comparatively high 2.3% (2018: +2.9%). The main growth driver was private consumption, supported by rising employment and higher real incomes. Industrial investment grew at a much slower pace due to lower capacity utilization. Exports stagnated amid a weak global economic environment caused by the escalating trade conflict and the resulting decline in exports to China.

Growth in the emerging markets of Asia was likewise slower overall than in 2018. In China, the GDP growth rate gradually weakened over the course of the year, due among other factors to the effects of the trade conflict with the United States, which increasingly made itself felt (2019: +6.1%, 2018: +6.6%). Growth in domestic demand was slower than in the previous year. However, in light of the stable employment figures, the Chinese government did not implement any major additional economic stimulus measures. The Chinese industry saw very mixed trends: Production in the automotive industry declined by 8.0%, while industries in the high-tech sector gained more than 8.8% overall. In India, liquidity bottlenecks negatively impacted lending and with it, demand for motor vehicles and investment goods. Overall, growth was considerably lower at 4.8% (2018: +6.1%). GDP growth in the remaining emerging markets of Asia was 3.7%, around one percentage point weaker than in the previous year.

Japan was able to increase growth slightly, with GDP rising by 0.7% (2018: +0.3%). Consumer spending stagnated and growth in private investment was slightly stronger than in the previous year. Private consumption was impacted by the two percentage point increase in sales tax in October 2019. Imports and exports declined amid a weaker global economic environment. Alongside the slowdown in China, developments were dampened by the trade conflict between Japan and South Korea.

Growth fell sharply in South America. In Argentina, the economic crisis intensified following the incumbent president’s unexpectedly weak showing in local primary elections. The Argentine peso almost halved in value against the U.S. dollar and inflation jumped to more than 50%. Argentina’s GDP contracted even more strongly than in the previous year (2019: –2.7%, 2018: –2.5%). The Brazilian economy was on a growth path but here, too, economic developments were curbed by the crisis in Argentina and the weak global economy (2019: +1.2%, 2018: +1.3%). Growth in Chile, Peru and Bolivia was dampened by social unrest there. Overall, GDP growth in South America slowed from 1.1% in 2018 to 0.7%.