Economic and financial risk insights - Recovery ongoing, but no 'all clear' yet

Global economic recovery is ongoing, but momentum is starting to fade

The global economic recovery has continued as a result of looser social distancing restrictions. Yet, its momentum is starting to fade as increasing infection numbers prevent a return back to full normality. We estimate current GDP shortfalls of G7 countries to be between 3 - 9%. Manufacturing and Services PMIs in the US and EA confirm the ongoing recovery though the EA shows somewhat weaker momentum. After a growth bounce-back in Q3, we expect the recovery to lose steam in Q4.

The Fed's change of its monetary policy strategy cements lower rates for longer. While good for risky assets, it will not help the real economy. Looking ahead, it's too early for an 'all clear' for the global economy.
Jérôme Haegeli, Group Chief Economist, Swiss Re Institute

Key Takeaways

  • The ongoing economic recovery remains fragile and is starting to lose steam.
  • Additional monetary and fiscal measures are needed to avoid a double-dip recession.
  • The Fed's monetary policy framework review cements the "Fed put" and low interest rates for longer.
  • Our forecasts remain largely unchanged.
  • Balance of risk remains to the downside. US fiscal stimulus uncertainty and US-China trade tensions are key to watch.


Economic Outlook Recovery ongoing, but no 'all clear' yet