Economic and financial risk insights - vaccination-led recovery on stronger footing in the US than Europe

Vaccination begins, but renewed lockdowns signal double-dip recession in Europe.

The roll-out of vaccinations in the advanced world from December increases the likelihood of a return to near-normality for many economies in the second half of 2021. Yet many governments have simultaneously tightened or extended mobility restrictions in response to a resurgence in COVID-19 cases, the emergence of new COVID-19 variations, and overburdened healthcare systems. We now expect double-dip recessions in both the Euro area and the UK, led by the service sector, since manufacturing has been more resilient. We have revised down our 2021 growth expectations for the UK to 4.2% (-0.5ppt) on the back of the renewed national lockdown.

With vaccination campaigns under way, global recovery will gain steam in Q2 2021 after more pain for many advanced markets in Q1. We expect the US to return to pre-crisis GDP well ahead of Europe.
Jérôme Haegeli, Group Chief Economist, Swiss Re Institute

Key takeaways

  • Vaccination roll-out supports expectations for a return to normality in H2 2021. Still, a surge in COVID-19 cases will lower Q1 growth.
  • We lift our US GDP growth forecast to 4.5% for 2021. The Democratic party's majority in both houses increases room for further fiscal stimulus.
  • We lower UK GDP growth to a projected 4.2% for 2021 as renewed national lockdown will likely cause a double-dip recession.
  • The UK's significant Brexit non-tariff barriers and lack of a deal for services will create a larger output drag than in the EU.
  • Risks to the global outlook are balanced with further pandemic setbacks the dominant global near-term risk.

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Economic Outlook Economic and financial risk insights - vaccination-led recovery on stronger footing in the US than Europe

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