Economic Environment¹

Global economic growth in 2023 was weighed down in many countries by high inflation and rising interest rates. Due to both front-loading and catch-up effects from the coronavirus pandemic, demand for goods increased much slower than demand for services. Industrial production and demand for chemicals were therefore extremely weak.

• The outlook on the economic environment in 2024

Global gross domestic product (GDP) grew by 2.6% compared with the previous year (2022: +3.1%). Global industrial production rose by 1.4% (2022: +2.9%). Global chemical production rose by 1.7% (2022: +2.1%), albeit with marked variation between different regions. While chemical production grew by 7.5% in China, it shrank by 3.9% in the rest of the world.

The average price for a barrel of Brent crude oil remained considerably below the prior-year level at $82 per barrel (2022: $101 per barrel). The annual average gas price in Northwestern Europe was €40.52 per MWh ($12.83 per mmBtu), around two-thirds below the prior-year level, but still more than twice as high as the average annual price for 2015 to 2020 and more than five times as high as in the United States.

Trends in the global economy in 2023

Macroeconomic development in 2023 was dampened overall. However, there was significant regional variation. While gross domestic product growth in the United States accelerated considerably in the third quarter after a moderate first half of the year, gross domestic product in the European Union (E.U.) largely stagnated. In the United States, private demand was supported by the depletion of savings, rising employment and growing wages. Despite solid labor markets, consumers in the E.U. were reluctant to spend in view of the rise in electricity and gas prices and the uncertainty caused by the war in Ukraine. Economic development in Asia was mixed. In China, a dynamic start to the year in the first quarter was followed by weak growth in the rest of the year. Domestic demand in China remained subdued due to the economic uncertainty surrounding the real estate crisis and exports suffered as a result of the weakness of the global economy. In Japan, the economy picked up temporarily due to the weaker exchange rate, growing private consumption and high demand for cars domestically and abroad.

In our customer industries, existing order backlogs continued to be processed after the disruptions in the supply chains had largely receded. This catch-up effect led to high growth rates, particularly in the automotive industry, which had previously been affected by significant supply problems. In contrast, demand for consumer goods such as furniture and consumer electronics fell considerably following the boom in demand during the coronavirus lockdowns. In the construction industry, the sharp rise in interest rates in many countries was increasingly reflected in falling demand.

The persistently high energy prices did not fully reflect the weak global economy. The oil price in particular was supported on the supply side by several production cuts by the OPEC+ countries.

Economic trends by region

In the E.U., GDP grew by just 0.5% in 2023 (2022: +3.6%). As in the previous year, there were considerable differences between the traditional tourist destination countries and the economies that are more oriented toward industry and goods exports. While GDP in Spain increased by more than 2%, France and Italy only achieved GDP growth of less than 1%.

Conversely, in Germany, gross domestic product decreased slightly by 0.1% after adjustment for calendar variations. Private consumption fell due to the high inflation rate and the resulting decline in the purchasing power of private households. In contrast to the other major E.U. countries, government spending also fell considerably, due to the absence of pandemic-related extra spending. The weak global economy was ultimately reflected in a decline in exports, although this was also offset by a sharper decline in imports. Foreign trade therefore made a positive contribution to the growth of the German economy overall. Due to the decline in production in the energy-intensive industries and in the construction industry, German industrial production declined by around 1%.

Growth in the Eastern E.U. countries also slowed significantly (2023: +0.5%, 2022: +4.2%). Although consumer price inflation decreased slightly compared with the previous year, at around 11% it was considerably higher than in Western E.U. countries (around 6%). In addition to the loss of purchasing power, these countries were particularly affected by the weakness of the manufacturing sector due to their above-average industrial share.

In the United Kingdom, GDP only grew weakly, by 0.5% (2022: +4.3%), as private consumption only increased slightly against the backdrop of high inflation rates and as rising interest rates increasingly restricted the spending flexibility of private households.

In the United States, economic performance was considerably better than we had expected at the beginning of the year. At 2.5%, GDP grew more strongly in 2023 than in the previous year (+1.9%). Growth was mainly driven by private services consumption and a demand for motor vehicles and leisure goods. Private households continued to deplete the savings they had accumulated during the coronavirus pandemic. Industrial construction, which benefited from government subsidies for the semiconductor industry, also contributed to growth. Conversely, production in the manufacturing industry declined slightly by 0.5%.

In 2023, the economy in China recovered only hesitantly from the coronavirus-related restrictions in 2022. After low growth in 2022 (+3.0%), the growth target of 5% was achieved. However, domestic demand for goods grew only modestly and goods exports were weak due to the ailing global economy. The crisis in the housing sector continued despite government support measures, and youth unemployment remained high. Against this backdrop, Chinese consumers were particularly reluctant to spend on consumer durables.

In most of the other emerging markets of Asia, particularly India (2023: +6.5%, 2022: +7.3%) and Indonesia (2023: +5.1%, 2022: +5.3%), growth remained at a high level against the backdrop of solid domestic demand. At 4.7%, the entire country group grew at a slower rate than in the previous year (+5.7%). In Japan, gross domestic product grew at an above-average rate of 1.8% (2022: +0.9%) due to a weak yen, declining imports and rising automotive exports, increasing investments and a moderate rise in private consumption. In South Korea, however, growth was weaker than in the previous year due to weak export demand from China and low demand for information technology goods (2023: +1.4%, 2022: +2.6%).

In South America, growth in Brazil (2023: +3.0%, 2022: +3.0%) was supported by high production growth in agriculture. In Argentina, economic development declined in an environment of very high inflation rates and a rapidly falling currency (2023: –1.7%, 2022: +5.0%). All in all, the countries in the region grew by 1.4% in 2023, considerably slower than in the previous year (2022: +3.7%).