Economic and financial risk insights - vaccine cure around the corner but formidable challenges persist

A potential vaccine indicates a brighter global outlook

In light of the sooner-than-expected announcement of what appears to be an effective vaccine against COVID-19, we view the economic risk outlook as roughly balanced. As questions around effectiveness, duration of immunity, its resilience against new strains of the virus, logistical hurdles, timeline for rollout etc remain, mobility restrictions will likely remain in place in heavily virus-affected regions. As such, we expect a double-dip contraction in the Euro area in Q4. We also continue to expect a protracted recovery and have revised down our forecasts of 2021 GDP growth in the US and EU to 3.5%/4.0% respectively.

An effective COVID-19 vaccine is good news for the global economic outlook. Yet the structural damage from the COVID-19 shock, in the form of higher debt and inequality, alongside weak economic resilience pre-COVID-19, are brakes on the longer-term outlook. A policy reset is needed.
Jérôme Haegeli, Group Chief Economist, Swiss Re Institute

Key Takeaways

  • A potential COVID-19 vaccine implies a more balanced risk outlook for the global economy. We see potential upside risk for 2021 GDP forecast.
  • Ongoing mobility restrictions will lead to a double-dip contraction in the Euro area in Q4.
  • A Biden presidency and split Congress in the US suggest that fiscal stimulus of more than USD 1 trillion is off the table.
  • Even with a potential vaccine, we continue to expect a protracted recovery. We revise down 2021 US and EU real GDP growth to 3.5%/4.0% respectively.
  • The balance of risk has become more neutral as downside risks are largely offset by the potential for a COVID-19 vaccine.


Economic Outlook Vaccine cure around the corner but formidable challenges persist