A team of insurance industry analysts says the world economy could follow one of four paths from now through 2022. One of the scenarios looks pretty good, one looks great, and two look awful.
Jérôme Jean Haegeli, the chief economist for the Swiss Re Group, and other forecasters put the four economic scenarios in a new report on the state of global insurance markets. The report was issued by Swiss Re Institute, a Swiss Re Group research arm.
In the baseline scenario, which may have a 65% to 70% chance of occurring, according to the forecasters, availability of a COVID-19 vaccine helps get economic activity back to normal, with a gradual recovery showing up in 2021 and 2022.
In the optimistic scenario, which might have a 15% chance of occurring, pent-up demand for goods and services, and successful government economic policies, could lead to even stronger, faster growth, with corporate demand for growth capital leading to steady increases in interest rates.
The forecasters’ two pessimistic scenarios are a “severe and protracted recession,” which might have a 5% chance of occurring, and a “stagflation” scenario, which might have a 10% chance of occurring.
Both the recession scenario and the stagflation scenario would start with countries’ lacking the ability to get the COVID-19 pandemic under control.
The severe recession would involve broad lockdowns, severe social unrest, a global credit crisis, regional wars, high unemployment and a housing price collapse.