Chemical industry to follow modest & fragile recovery in 2010

01 Jan '10

4 min read

A modest and fragile recovery is under way after a coordinated monetary and fiscal stimulus. Industrialised countries have been the hardest hit by the financial and economic crisis. China, where the government has injected huge sums to maintain growth, has led the way after little more than a brief pause. The US had begun a downturn as early as Q4 2007 but still shared with Europe and Japan the steep fall at the end of 2008.

The developed countries have now belatedly begun a hesitant recovery. Consumer confidence remains low in the face of high unemployment and business has continued worries over difficult credit markets. Many financial institutions remain in convalescence. Most industrial sectors have been severely affected, especially automotive and other transport equipment, steel, textiles, machinery, electronic and electric equipment, and construction.

Recovery so far has been highly dependent on the coordinated stimuli provided by governments. These have come at the cost of very large increases in public debt. In order to prevent this running out of control, governments will soon need to reverse the outflows and rebuild their own financial stability. The timing of the changes in policy will need to be finely judged in order that the recovery is not put in jeopardy, while avoiding the need for an even harsher correction if they are left too late.

The slow recovery from what has been the deepest recession since the Second World War means that there have been enormous growth losses relative to trend. These losses appear unlikely to be made up, even though 2011 and 2012 should see greater underlying momentum and a return to more normal conditions.

Cefic, the European Chemical Industry Council

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