BASF Report 2021 Management’s Report – Economic Environment 53 Gross domestic product Rapidly rising vaccination rates, as well as the complete reopening the automotive industry. Japan’s GDP only grew by 1.7% (2020: Real change compared with previous year of the U.K. economy from mid-July, contributed to this. However, –4.5%). South Korea saw significantly higher growth of 4.0% (2020: 2021 2020 the consequences of Brexit were felt over the course of the year, –0.9%). World 5.8% –3.4% particularly due to the shortage of labor in logistics chains and skilled E.U.1 5.2% –6.1% trades. The South America region recorded a rapid economic recovery, United States 5.7% –3.4% supported by rising prices for agricultural goods and industrial raw Russia’s GDP grew by 4.3% (2020: –2.9%). Increased oil and gas materials. Domestic demand in some countries was, however, Emerging markets of Asia2 7.3% 0.0% prices led to rising trade surpluses and bolstered growth, while high dampened by currency devaluations and rising inflation rates. Brazil Japan 1.7% –4.5% infection rates and lockdowns weighed on the economy. was able to increase its GDP by 4.7% (2020: –4.2%), bolstered by a South America 6.8% –6.2% considerable rise in exports and investments as well as moderate Economic development in the United States was volatile. Govern- growth in private consumption. Argentina’s economic output grew ment stimulus programs bolstered household demand considerably by a strong 9%, though the previous year’s decline had been signifi- Economic trends by region early in the year, which resulted in strong GDP growth in the first two cantly larger at nearly –10%. For the region as a whole, GDP rose by quarters. However, due to the expiration of aid benefits and a further 6.8% in 2021, after a decline of approximately the same magnitude In the European Union (E.U.), GDP grew by 5.2% (2020: –6.1%). rise in infection rates coupled with increasing supply problems due in the previous year. At the beginning of the year, restrictions in stationary retail, hospi- to congestion in the country’s largest ports, growth in private con- tality, tourism, and the cultural and entertainment sectors negatively sumption was more sluggish in the second half of the year. In total, impacted economic recovery. In the course of the second quarter, GDP in the United States grew by 5.7% in 2021 (2020: –3.4%). Trends in key customer industries the restrictions were successively relaxed as a result of falling infec- tion rates. At the same time, the vaccination campaign, which got In the emerging markets of Asia, growth weakened significantly in Growth in industrial production was negatively impacted by supply off to a slow start due to a shortage of vaccines, gained momentum. the course of the year. China’s dynamic recovery that began in the difficulties in 2021. In many areas, existing orders could not be pro- Due to base effects, GDP growth in the second quarter was in the previous year continued initially. However, mobility restrictions and cessed due to a lack of intermediate goods. Transport capacities, double digits compared with the previous year. There was, however, selective lockdowns, even with only few occurrences of coronavirus especially ship and container capacities in overseas trade, were not also a significant upturn in the second and third quarters of 2021 infections, as well as more restrictive financing conditions in the sufficient to meet the sharp rise in demand for industrial goods. compared with the first quarter, especially in European tourist construction sector, negatively affected domestic demand growth. Furthermore, manufacturing disruptions in Asia due to regional destinations. In France (+7.0%), Italy (+6.4%) and Spain (+5.0%), In addition, energy was rationed. By contrast, export demand grew lockdowns were also a factor. GDP grew especially dynamically in 2021. By c ontrast, Germany significantly. In total, the Chinese economy expanded by 8.1% was hit harder by bottlenecks in intermediate inputs for the invest- (2020: 2.2%). Many other emerging markets in Asia, including India, Global industrial production grew by 6.5% in 2021 (2020: –3.0%). ment goods and automotive industries. At 2.8%, Germany’s Malaysia and Thailand, were forced to temporarily adopt restrictive The advanced economies saw somewhat lower growth of 5.3% economy thus grew at a below-average rate in 2021. Despite lower measures to contain waves of infection. All in all, the region grew by overall than the emerging markets, which saw a rise of 7.4%. The vaccination rates and higher infection rates, growth in the eastern 7.3% in 2021. largest contribution to global industrial production growth came E.U. countries (+5.3%) was at a similar level to that in the western from China (2021: +8.4%; 2020: +3.7%). Around 30% of global E.U. countries (+5.2%). The economies of Japan and South Korea were also significantly industrial value creation and almost 40% of its growth were gen er- impacted by the pandemic. Japan temporarily declared a state of ated there. In total, over 50% of global industrial growth came from Despite the end of the Brexit transition period at the beginning of the emergency. Private consumption was thus only able to increase Asia. The region’s production expanded by 7.5% in 2021 (2020: year, the United Kingdom’s economy (2021: +7.5%) recovered slightly. Although exports rose considerably, they were negatively –0.1%). substantially from its major slump in the previous year (2020: –9.4%). affected by the decline in growth in China and supply bottlenecks in 1 In this chapter, “E.U.” refers to the E.U. 27. 2 We define the emerging markets of Asia as Greater China, the ASEAN countries (Brunei, Indonesia, Malaysia, Myanmar, Cambodia, Laos, the Philippines, Singapore, Thailand, Vietnam), India, Pakistan and Bangladesh.