Economic and financial risk insights: pandemic risks darken the outlook

The euro area is roaring in Q3 to a post-crisis peak level of growth as unemployment (7.6% in July) continues to drop and inflation continues to rise. Elsewhere however, downside pandemic risks are materialising. The US and Asia are battling surging cases of COVID-19 Delta variant and the World Health Organization has designated mu a fifth current "Variant of Interest".

We expect Europe to reach peak growth and inflation this quarter, but growth is slowing elsewhere as COVID-19 regains momentum and emerging markets withdraw monetary support to prevent overheating.
Jérôme Haegeli, Group Chief Economist, Swiss Re Institute

Key takeaways

  • Europe is approaching its post-crisis peak growth. In the US, job creation has fallen short and consumer confidence has weakened as the Delta variant spreads; Mu becomes a fifth WHO "Variant of Interest".
  • We see sustained US inflation pressure as job market friction drives up wages, and rising inflation in Europe and the UK.
  • Emerging markets tighten monetary policy to bolster currencies ahead of tapering in the US and euro area.
  • We revise down our 10y yield forecasts for the US, euro area and UK as pandemic downside risks start to materialise.


Economic Outlook Economic and financial risk insights: pandemic risks are back