Economic and financial risk insights: world economy approaches post-crisis peak growth

We expect world economic growth to reach its post-crisis peak in the coming months. We anticipate a strong recovery in Europe in the second half of 2021 as high vaccination rates enable restrictions to lift, whereas business surveys indicate that China and the US are likely already past their post-pandemic growth peaks. We lift our CPI inflation forecasts for the US to 3.7% and Euro area to 2.0% for 2021, but continue to see the surge in inflation as transient. 

Higher inflation and strong GDP growth warrant less central bank stimulus in future, but the withdrawal could challenge financial market valuations going forward.
Jérôme Haegeli, Group Chief Economist, Swiss Re Institute

Key takeaways

  • The global economy is reaching peak post-crisis growth, with momentum now rotating to Europe from China and the US.
  • We raise our 2021 forecast for euro area real GDP growth to 4.6%.
  • Vaccination success means new lockdowns in Europe are unlikely despite the spread of the Delta variant.
  • We forecast higher inflation in the US and Europe, but maintain our view that the jump in prices will be transient and will not lead to runaway inflation. 
  • The Fed is taking a more hawkish stance and rate hiking may begin sooner, we expect in 2023.

Tags

Economic Outlook Economic and financial risk insights: world economy approaches post-crisis peak growth

Contact

SEE ALSO FORMER ECONOMIC OUTLOOKS