In the News
Swiss Re: Global Economy Less Economically Resilient

• Iris Lai
• October 2019
• 

The global economy has become less resilient at absorbing a financial crisis than it was in 2007, according to Swiss Re's new report on macroeconomic resilience indices.

The main drivers for this trend are the exhaustion of monetary policy options in many developed economies and a challenging operating environment for the banking sector, even as financial institutions are stronger since the crisis, said Swiss Re. The new macroeconomic resilience indices use data from 2007 to 2018 for 31 countries, representing about 75% of the world gross domestic product.

Switzerland, Canada and the United States have the highest economic resilience, while the Euro area has decreased the most since 2007, said Swiss Re. Emerging economies have become slightly more resilient, and “we expect higher-quality growth to continue this trend,” added Swiss Re.

Latin America recorded an improvement in economic resilience, although at a low level due to structural challenges. The region's capital markets are not sufficiently developed, labor markets show low productivity and a significant part of the population remains vulnerable to falling back into poverty.

“Emerging markets, in particular, benefit more strongly from insurance protection than mature economies, which often have greater access to alternative sources of funding,” said Jerome Jean Haegeli, group chief economist at Swiss Re.

Asia and Oceania recorded “fairly stable economic resilience scores between 2007 and 2018,” said Swiss Re. Resilience levels in China, Japan and Australia improved, but India's resilience declined mostly due to lower index scores for the financial sector component, including banking industry environment, financial market development and insurance penetration, it added. A growing number of complex and interconnected risks, including slowing global growth, ballooning government debt, negative interest rates, rising political risk, inequality, catastrophe losses, climate and technology change, are challenging the world. From a loss perspective, Swiss Re said natural catastrophes are the main threat to global resilience.

“The rising frequency of extreme weather events, geopolitical and macroeconomic instability, aging populations and rising health care spending have transformed the risk landscape in Asia and globally,” said Russell Higginbotham, CEO of reinsurance and regional president for Swiss Re Asia.