BASF Report 2021

Economic Environment 20221

At a glance

  • Moderate GDP growth expected in Europe and the United States
  • Strong growth assumed in Asia
  • Moderate growth in global industrial production
  • Fragile recovery in the automotive industry
  • Slower but still above-average growth forecast for the chemical industry

For Europe and the United States, we expect a moderate weakening of growth momentum compared with the previous year. For China, however, – which made an earlier start to its economic recovery following the downturn in 2020 – we anticipate much slower but still solid growth. Growth in the other emerging markets in Asia will likely be slightly stronger than in the previous year.

However, uncertainty about future developments remains high. The further course of the coronavirus pandemic could impact demand more severely than expected. Supply difficulties in the global value chains could continue for longer than assumed in our outlook. High energy prices and higher inflation rates could dampen consumer purchasing power more strongly than expected in our forecast.

Trends in the global economy in 2022

Overall, we anticipate moderate GDP growth of 3.6% (2021: 5.2%) in the European Union (E.U.). This will be driven in part by the economic upturn in the services sector and the gradual overcoming of supply difficulties that we anticipate for the industrial sector. Growth will also be supported by payments from the European Recovery and Resilience Facility. We expect the differences in growth rates between the E.U. member states to be less pronounced than in the previous year. The dynamic recovery in the western European countries that grew particularly strongly in 2021 (France, Italy) is expected to weaken somewhat, while Germany should see slightly stronger growth. In the eastern E.U. countries, we expect growth rates to converge at a similar level.

We expect the recovery to continue in the United Kingdom, although this is subject to considerable uncertainty. In particular, labor shortages in logistics and hospitality may slow further recovery. Overall, we anticipate GDP growth of 3.8% there (2021: 7.5%).

For the United States, we are forecasting growth of 3.8% (2021: 5.7%). Growth will be supported by government spending on infrastructure, social and climate programs. A continued revival of the labor market should partially compensate for the phasing out of extended unemployment benefits under the COVID relief package. Delays in the clearance of goods at U.S. ports should gradually become less relevant as growth in demand for goods slows and shifts toward the services sector. In addition, congestion at ports should gradually ease. Labor shortages will prevent a stronger upturn, which will dampen the recovery in the services sector in particular.

We expect growth in the emerging markets of Asia to slow overall. In China, the real estate sector will cool. In addition, the zero-tolerance policy toward the coronavirus pandemic will likely curb the recovery in private consumption. We also assume that selective measures to contain new coronavirus outbreaks will continue to negatively impact industrial value chains and logistics. Overall, we expect Chinese GDP to grow by 4.5% in 2022 (2021: 8.1%). Economic development in India remains uncertain given the still low vaccination rate. We expect growth there to be slightly lower than in the previous year (2022: 7.0%; 2021: 8.1%). This will be driven in particular by a recovery in private consumption. In this environment, we expect slightly higher GDP growth of 4.6% (2021: 4.2%) for the other emerging Asian economies. This is anticipated due to positive base effects and a gradual recovery in tourism.

In Japan, we expect growth momentum to pick up only slightly in the coming year (+2.5%) after weak growth of just 1.7% in 2021. Growth will be supported by private consumption and investment, while the slowdown in China is expected to have a dampening effect on exports. Government stimulus measures could however accelerate growth more strongly than assumed in our forecast.

In South America, growth is expected to weaken significantly in 2022. High net exports of industrial and agricultural commodities will continue to support the Brazilian economy but will no longer provide strong growth impetus. Growth in domestic demand will be curbed by high inflation rates, increased debt and rising interest rates. Overall, we are forecasting growth of only 0.4% for Brazil in 2022 (2021: 4.7%). In Argentina, too, growth will slow significantly against the backdrop of continued very high inflation and increasing fiscal consolidation requirements (2022: 2.3%; 2021: 9.0%). For the other emerging markets in South America, we expect growth to be slightly higher compared with other countries, but likewise significantly weaker year on year (2022: 3.2%; 2021: 9.5%), as the positive base effects from the previous year also level off in these countries.

Outlook for gross domestic product 2022

Real change compared with previous year

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

Trends in gross domestic product 2022–2024

Average annual real change

Trends in gross domestic product 2022–2024 (Average annual real change) (bar chart)

1 Our assumptions account for current estimates by external institutions, including economic research institutes, banks, multinational organizations and consulting firms.

Value chain
A value chain describes the successive steps in a production process: from raw materials through various intermediate steps, such as transportation and production, to the finished product.