The European Chemical Industry Council (CEFIC) has downgraded its growth forecast for chemical production in the EU for both 2015 and 2016.

In 2016, the association now expects output to grow by 1% next year, having forecast 1.5% at the CEFIC general assembly in October. For 2015, it is anticipating growth of just 0.5%, down from its previous prediction of 1%.

This latest forecast reflects declining demand from key industries, competition from other countries and economic slowdowns in important export markets, such as Brazil and Russia.

CEFIC said the business environment for chemicals has been challenging this year, with slower-than-expected growth in construction and only moderate growth in manufacturing.

The automotive industry was the only sector to perform better than anticipated, seeing a second year of strong recovery. Softer growth is expected next year, although other industries such as food and beverage and construction are forecast to improve and offset any downturn in automotive demand.

Global demand growth for intermediate chemicals also slowed significantly this year. China’s economic slowdown is said to have been the major factor behind weaker global manufacturing growth which declined to 2%.

Although low oil prices and a favorable euro/US dollar exchange rate would support a rise in European exports, the weaker growth in global demand has not been enough to significantly boost demand for the region’s chemicals this year, CEFIC said, adding that the world economy is expected to grow only moderately next year. Stable GDP growth is forecast for the EU, albeit with some regional differences.

Director General Hubert Mandery said although CEFIC is forecasting a slight uptick in growth in 2016, low oil prices and the beneficial exchange rate could not be expected to last indefinitely.

Mandery also called on EU policymakers to support the competitiveness and innovative capacity of the European chemical industry to secure long-term growth.