Economic Environment in 2020

We expect economic uncertainty to be very high in 2020 and that global growth will be significantly depressed by the drop in demand and production outages in connection with the coronavirus outbreak. The global economy is forecast to grow by 2.0%, considerably slower than in 2019 (+2.6%). In the European Union (E.U.),1 economic growth in most member states should continue to soften. We also expect momentum to slow in the United States as the tax incentives expire and employment growth levels off. Growth in the emerging markets of Asia will presumably be much weaker due to a considerable slowdown in China in the first half of the year. We expect the South American economy to remain fragile and anticipate at best a weak recovery. Global chemical production is expected to grow by 1.2% in 2020, well below the 2019 level (+1.8%). For 2020, we expect an average oil price of $60 per barrel for Brent crude and an exchange rate of $1.15 per euro.

Trends in the global economy in 2020

  • Lower growth forecast for the E.U. and the United States
  • Growth deceleration in China expected to continue
  • Weak recovery in South America

We expect growth momentum in the E.U. to continue to slow overall. We anticipate lower growth rates in Germany, France and Spain. For Italy, we are forecasting a slight decline in gross domestic product (GDP). Besides cyclical economic weakness, lower demand for European investment goods and vehicles in China will contribute to this development. In the United Kingdom, the uncertainty surrounding the nature and consequences of its departure from the E.U. remains high, which will dampen investment activity. As a result, we expect a considerable slowdown in economic growth. Economic momentum in the eastern E.U. countries is also likely to slow, but should remain high compared with western Europe thanks to rising real incomes.

We expect a gradual easing of growth in the United States. Private consumption will presumably continue to be supported by solid employment figures and rising incomes but employment growth will trend downward. Industry investment dynamics should continue to decline as the initial impetus from the tax reform levels off and capacity utilization is often below average. The trade conflict with China is also expected to further weigh on growth since it is not currently expected that the additional tariffs introduced over the course of 2019 will be widely rolled back. This makes U.S. imports of intermediate inputs from China more expensive and reduces the ability of U.S. exporters to compete on price in China. Exporters will also have to contend with the effects of a continued strong U.S. dollar.

The emerging markets of Asia will presumably see much slower growth. We expect growth in demand and production in China to be much weaker than in the previous year due to the coronavirus outbreak. The resulting decline in China’s import demand will also have a negative impact on the economies of its neighboring countries in Asia. Moreover, production restrictions in China may lead to interruptions in neighboring countries, since value chains are particularly closely interconnected in Asia. Against this background, we anticipate a marked growth deceleration in China to 4.5%. For India, we expect an unchanged, comparatively weak growth rate of below 5% in this environment. The corporate tax cuts taken in response should only start to take effect after a delay amid a challenging international environment.

We are forecasting flat GDP for Japan. Private consumption is likely to remain subdued after the consumption tax rate was raised in October 2019. Exports and investment are not expected to provide any strong stimulus in a weak overall economic environment. However, the government has approved a package of fiscal measures to cushion the negative effects of the tax increase and avoid a slide into recession.

In South America, leading economic indicators point to ongoing recovery in Brazil. By contrast, the recession in Argentina is likely to continue. Overall, the forecast remains uncertain due to the social conflicts that have intensified significantly in several countries in the region. In addition, lower Chinese demand should have a negative impact on raw materials exporters in the region. We therefore only expect a weak recovery in macroeconomic activity.

1 In the rest of this chapter, “E.U.” refers to the E.U. 27 and the United Kingdom.

Outlook for gross domestic product 2020

Real change compared with previous year

Outlook for gross domestic product 2020 (Real change compared with previous year) (bar chart)
Trends in gross domestic product 2020–2022

Average annual real change

Trends in gross domestic product 2020–2022 (Average annual real change) (bar chart)