Swiss Re Economic Risk Survey: Rising concern about currency fluctuations, but abating worries about a sharp decline of stock markets
10 Dec 2003
Swiss Re's sixth survey of economists' opinions shows that there are increasing concerns about currency fluctuations. The 'Economic Risk Survey'1 , conducted in October/November, however also indicated that worries of a sharp decline of stock markets are abating, when compared to the previous survey conducted in April.
The biannual "Economic Risk Survey" takes the opinions of 38 economists from Europe and the United States and focuses on the probability of economic performance substantially deviating from the general economic consensus.
Swiss Re Senior Economist Christian Schmidt said, "The results of the survey support the view that the global economic outlook has improved markedly since last April. There are fewer things to worry about - stock markets are more stable, neither inflation nor deflation is a major risk, and growth is expected to improve. The only risk that is rising involves the strength of the dollar - the dollar is viewed as more vulnerable than six months ago."
There is an increasing concern about a potential devaluation of the US dollar. Respondents indicated that the likelihood of the US dollar declining by 60 percent against the Euro over three years was 12 percent (up from 8 percent from the April survey), while the estimated probability of the Euro losing 60 percent of its value in comparison to the US dollar is around 5 percent (unchanged).
According to the economists, the risk of a further stock market crash has decreased both in the US and Europe over the last six months. The estimated probability of a stock market crash in 2004 - defined as a 25 percent decline in a major stock market index - is 13 percent for the US (down from 21 percent in April) and 16 percent for Europe (down from 23 percent). The likelihood of a persistent bear market from 2004 through 2013 - the market not recovering to 2003 year-end levels until after 2013 - was around 4 percent both in Europe and the US. This compares to 6 percent for the US and 5 percent in Europe in the previous survey.
The global economy has shown signs of gaining strength over the past few months. Reflecting this, the 38 survey respondents give a probability of 59 percent for US growth exceeding 3 percent in 2004. In Europe, growth is expected to be above 0 percent but below trend growth of about 2 percent with a 64 percent probability.
In this November's survey the participants considered the risk of deflation to be small. Respondents rated the risk of falling prices over the next five years to be around 3 percent both in the US and Europe. The likelihood of a period of very low inflation has increased over the last six months. Inflation below 1 percent in the short term has a probability of 14 percent for the US and 15 percent for Europe. In the previous survey estimates were 8 percent for the US and 9 percent for Europe.
1 The survey was undertaken within the time period 24 October to 10 November 2003.
Notes for editors:
Swiss Re is a leading reinsurer and the world's largest life and health reinsurer. The company is global, operating from 70 offices in 30 countries. Since its foundation in 1863, Swiss Re has been in the reinsurance business. Swiss Re has three business groups: Property & Casualty, Life & Health and Financial Services. Swiss Re offers a wide range of traditional reinsurance products and related services, which are complemented by insurance-based corporate finance solutions and supplementary services. Swiss Re is rated "AA" by Standard & Poor's, "Aa1" by Moody's and "A+" by AM Best.
How to obtain a copy of the "Swiss Re Economic Risk Survey":
The study is available electronically on our sigma section.
This news release is also being distributed by e-mail; to receive a copy, please contact sigma@swissre.com (please mention "Economic Risk Survey").
Or contact Swiss Re Economic Resarch & Consulting:
| Zurich: | tel. +41 43 285 2551, | fax +41 43 285 4749 |
| New York: | tel. +1 212 317 5135, | fax +1 212 317 5455 |
Contact
Economic Research & Consulting, Zurich
Christian Schmidt, tel. +41 43 285 2001
Thomas Hess, tel. +41 43 285 2297
Economic Research & Consulting, New York
Kurt Karl, tel. +1 212 317 556
Group Media Relations, Zurich
tel. +41 43 285 7171
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