Economic and financial risk insights - Economic recovery: a very long and steep curve ahead

Global economies resumed growth yet the recovery pace is uneven: Global mobility remains substantially below normal levels while our mobility-based SRI GDP Shortfall Index shows GDP shortfall in G7 further improved to -7.0%. The July global manufacturing PMI is indicating higher activity levels going forward, albeit from a lower level. However, the global recovery is uneven – the Chinese economy expanded 3.2% yoy in 2Q20 whereas the US and Euro Area contracted by -9.5% and -12.1% yoy respectively. This is also reflected in the divergent pace of easing containment measures across markets.

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Economic recovery is facing a very long and steep curve ahead. Not V-shaped.
Jérôme Haegeli, Group Chief Economist, Swiss Re Institute

Key Takeaways

  • Q2 GDP confirmed an unprecedented hit to the global economy by COVID-19 shock, while the pattern confirms our expectation that China will recover first, followed by the US and Euro Area.
  • Leading indicators suggest global economic activities have resumed growth momentum in July, albeit from a lower level. 
  • The pace of recovery is uneven across markets, whereas China is leading the way. 
  • Additional fiscal measures are needed to safeguard economic recovery and we expect more to be announced in Q3.
  • Ongoing structural changes include the upcoming Fed policy framework review and the joint Eurozone recovery funds.
  • We keep growth forecasts of major markets unchanged.
  • Balance of risk remains to the downside. US fiscal stimulus uncertainty and US-China trade tensions are key to watch.


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Economic Outlook Economic and financial risk insights - Economic recovery: a very long and steep curve ahead