Commentary: The growth debate

18 October 2013 09:40  [Source: ICB]

As the IMF downgrades global forecasts once again, two industry executives invite 
us to think carefully about long-term future prospects for the chemical industry

News that the International Monetary Fund (IMF) has yet again downgraded its global GDP growth forecasts highlights not just the fragility of the global economic recovery but also the difficulties involved in forecasting growth, especially over the long term.

The group cut its forecast for 2013 global economic growth from 3% in July to 2.9%, well below the 3.2% achieved in 2012. The IMF warned that downside risks have increased, with continuing weakness in Europe, US fiscal uncertainties hitting recovery there and China stalling.


 The IMF’s Lagarde weighs in on the demographics debate

Rex Features

There is a bigger debate about growth going on, which we highlighted in last week’s ICIS Chemical Business. We published two contrasting views on the long-term prospects for the global economy entitled “This is the end of constant growth” and “Speedy growth for chemicals by 2050”.

The first article, written by International eChem’s Paul Hodges, argues that demographics will be the determining factor in driving future economic performance. With fewer babies being born and increased longevity in mature and emerging economies, demand will cease growing quickly. The chemical industry will have to get used to a “New Normal” of sustained low or flat GDP growth and look for opportunities within that framework.

He says that the arrival of the post-war “baby boomers” created a 25-year supercycle from 1983. Demand grew exponentially as young, dual-income families spent money on household goods and cars. Now that generation is entering old age; pensioners spend less and in different patterns.

Hodges believes the global economy will be governed by three groups of people:

■ Rich but old: 1bn people in western countries with GDP/capita of $45,000 who are asset-rich but cash-poor;

■ Poor but young: 4.8bn people in emerging economies with GDP/capita of $4,000

■ Poor and ageing: 1.5bn people in China and Russia with GDP/capita of $7,000

The other view comes from Styron’s Rafael Cayuela, who gives his personal view based around the opportunities presented by bullish projections of a quadrupling of global GDP from 2010-2050 to $280 trillion. “The world will have the potential to host one of the largest, wealthiest and healthiest societies in human history,” he says. Cayuela sees the chemical industry growing from $3.1 trillion to $14.9 trillion with world per capita consumption of chemicals growing from $456 in 2010 to $1,631 by 2050.

Multinational companies will grow to exceed the size of economies of many national economies, with producers such as BASF or Dow Chemical achieving sales of $150bn-250bn.

In fact, he says, growth could be even steeper if the industry grasps the opportunities presented by helping to solve the challenges of resource and energy scarcity, carbon dioxide emissions and climate change. If the industry goes back to its roots of innovation and technology, it can play a major role in the “Third Industrial Revolution”, he argues. In addition, Cayuela says that the democratising power of social media such as Twitter and Facebook could have a dramatic effect, with the public examining the industry’s performance and pushing it to “called to action” mode.

Christine Lagarde, managing director of the IMF, said in October: “By 2030, there will be 1.1bn more people in the world than today and 97% of them will be in emerging and developing countries. One billion people will be 65 years or older. These demographics – and their inter-generational costs – will dramatically affect education, healthcare, savings, pensions and public spending.”

The authors of these articles have both written books on the subject and are keen to stir up a debate within the industry. We will all benefit if the chemical sector is prepared for a variety of scenarios.

Paul Hodges is co-author of an e-book, Boom, Gloom and the New Normal: How the Western Baby Boomers are Changing Demand Patterns, Again, available for download at

Rafael Cayeula is author of The Future of the Chemical Industry by 2050, published by WILEY-VCH and available at or

By: Will Beacham
+44 20 8652 3214

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