Economic Environment 20231
At a glance
- Stagnation expected in Europe and the United States
- Moderately higher growth in Asia
- Fragile recovery in the automotive industry
- Moderate growth in the industry as a whole
- Weak growth in global chemical production
- Further decline in European chemical production
In the European Union, gross domestic product is expected to stagnate on the back of high energy costs. High regional natural gas prices will continue to weigh heavily on production in energy-intensive industries. Consequently, we anticipate a significant decrease in chemical production in the E.U. at a similar rate to 2022. In North America, too, we expect gross domestic product to stagnate and chemical production to decline slightly. For China, we are forecasting slightly higher GDP growth compared with the previous year, while growth in other emerging Asian economies will probably weaken. Growth in chemical production in the Asian region as a whole is likely to remain stable overall.
Uncertainty about future developments remains exceptionally high. The future development of the war in Ukraine and its impact on economic growth is virtually impossible to predict. Our forecast assumes that the conflict does not escalate further. We are assuming that an acute gas shortage with regulatory cuts in natural gas supply to energy-intensive industries in Europe can be avoided. Moreover, we do not expect China’s departure from its zero-COVID strategy to have any adverse effects that would significantly reduce China’s growth or that of its trading partners.
Trends in the global economy in 2023
We expect GDP to stagnate in the European Union (E.U.) (2023: +0.1%, 2022: +3.6%). The support measures taken by many E.U. countries to mitigate the impact of the sharp rise in gas and electricity prices on households and small and medium-sized enterprises will help to prevent a stronger decline. The E.U. countries with a comparatively high industrial share of value added and a high share of natural gas in energy supply are likely to suffer further losses. As a result, we expect gross domestic product to decrease by 0.7% in Germany and by 0.4% in Italy. French GDP will presumably stagnate. The only major E.U. country expected to see slight growth is Spain (+1.0%). Average GDP in the Eastern E.U. countries will probably stagnate (+0.3%).
In the United Kingdom, we expect GDP to decline by 1.2% (2022: +4.1%) due to sharp increases in the cost of living and interest rates, which will depress private consumption and investment.
GDP in the United States is expected to stagnate in 2023. U.S. monetary policy is steering a restrictive course in order to further reduce the high inflation rate, which is already declining slightly. High interest rates are slowing construction activity, credit-financed purchases of durable goods and capital expenditures. Offsetting factors include good labor market data and government growth stimulus under the infrastructure program and the Inflation Reduction Act. Low gas prices by international standards will also improve the international competitiveness of energy-intensive industries in the United States.
In the emerging markets of Asia, we expect growth to be slightly higher overall (+4.4%) than in 2022 (+3.8%). This is solely due to higher expected growth in China (+4.5% in 2023 compared with +3.0% in 2022). For the other emerging markets in Asia, we expect growth to decline overall from 5.5% in 2022 to 4.3% in 2023. In India, growth is expected to slow to 5.2% (2022: +7.0%). Western trading partners’ weak performance will negatively impact the emerging Asian economies. At the same time, their currencies have depreciated significantly against the U.S. dollar in the past year, making energy imports in particular more expensive. We assume that this will be countered by a recovery in domestic demand in China following the lifting of the zero-COVID strategy.
In Japan, growth is also expected to slow due to weaker export demand from Western trading partners and the weaker yen, which will make imports more expensive. Conversely, higher growth in China, reduced bottlenecks for semiconductors for the Japanese automotive industry and the continued accomodative course of Japanese monetary policy will support the Japanese economy. We therefore expect only a slight decline in growth overall (2023: +1.0%, 2022: +1.2%).
In South America, growth is expected to weaken significantly in 2023. Private consumption in Brazil will no longer be supported by fiscal measures as in the previous year. Given the generally weak global economy, export demand is not expected to provide any additional strong stimulus either. The Argentinian economy is suffering from very high and rising inflation rates. In addition, the scope for additional government spending is severely restricted by the debt restructuring program. The global economic slowdown will also put pressure on raw materials prices. South America is unlikely to benefit from significantly rising export prices for industrial and agricultural commodities in 2023. Overall, we expect GDP in the region to grow by 0.8% in 2023 (2022: +3.7%).
1 Our assumptions account for current estimates by external institutions, including economic research institutes, banks, multinational organizations and consulting firms.