Economic and financial risk insights: two-speed global recovery as vaccination success diverges

The beginning of the end of the crisis, but diverging vaccination speeds are adding to risks

The US and UK are on track to roll back most COVID-19 mobility restrictions by the end of Q2, but Europe is hampered by vaccine delivery disruptions, regulatory suspensions and rising new infections. We leave our real GDP growth forecasts unchanged, but see increasing near-term downside risks to Euro area GDP growth. We caution that lockdown fatigue may lead to a rise in protests or social unrest in some countries. Still, we expect Europe's situation to stabilise in Q2 as vaccination deliveries are scheduled to triple vs Q1.

A picture of regional divergence is becoming clearer, with China, the US and the UK pushing ahead and the Euro area struggling to keep up.
Jérôme Haegeli, Group Chief Economist, Swiss Re Institute

Key takeaways

  • The US and the UK commence reopening as they make rapid progress on vaccination, and their cases and deaths have fallen sharply.
  • Downside risks to Euro area GDP growth rise as increases in infections lead to a national lockdown in France and longer restrictions in other countries. 
  • A proposed US infrastructure package of USD 3.2 trillion will support growth but risks of overheating are increasing.
  • Global business sentiment is improving with Euro area and UK PMIs pointing to expansion in economic activity ahead.

Tags

macroeconomicgrowth politics publichealth interestrates economicoutlook asiapacific unitedstatesofamerica europemiddleeast france unitedkingdom corona covid19

Economic Outlook Economic and financial risk insights: two-speed global recovery as vaccination success diverges

Contact

SEE ALSO FORMER ECONOMIC OUTLOOKS