• Emerging economies will again contribute significantly to activity, with average growth above 4.5 percent
  • The British economy faces risks associated with the possibility of companies relocating after the country leaves the European Union


MAPFRE Economic Research expects moderate global growth to continue this year, reaching an average rate of 3.1 percent. However, thanks to proactive monetary and fiscal policies implemented more or less across the board globally, the economy will see growth improve to near the global potential of 3.4 percent in 2021.

Emerging economies will continue to contribute more significantly to global activity than developed economies. The former are expected to grow steadily at a rate of or over about 4.5 percent on average over the next few years, thanks to more benevolent financial conditions, improved trade terms for countries producing agricultural raw materials, the recovery of some economies in recession (Turkey) and an upturn in key economies that had slowed considerably during 2019. Brazil is an example of one such key economy with improved economic forecasts, with GDP growth of 2 percent projected for 2020, compared to the estimated 1.1 percent for 2019, thanks to improved consumption and private investment. The pension reforms that have already been passed are expected to secure savings of 700 billion reals over 10 years. This is also the case in Mexico, where the economy is expected to return to growth levels of around 0.9 percent in 2020.

In the United States, growth of 1.6 percent is forecast for this year. In view of interest rate forecasts, both from members of the Fed’s Federal Open Market Committee (FOMC) and from market analysts, the economy is expected to have a soft landing, with interest rates remaining virtually unchanged until at least 2021, at which point a return to the upward trends of 2018 may be deemed appropriate. For the eurozone as a whole, discounting the UK’s exit from the European Union, growth risks revolve around the absence of reforms to boost economic activity, and the budgetary and solvency tensions of the member countries, principally Italy. Overall, MAPFRE’s experts estimate 1 percent growth for the eurozone this year.

In the specific case of the United Kingdom, the experts forecast a 1 percent increase in GDP this year and 1.9 percent in 2021. The risks facing the British economy are associated with companies potentially relocating following the country’s withdrawal from the European Union, a cooling real estate market and the pound sterling rising in value, which would further ease inflation and hinder exports. The likely signing of a withdrawal agreement should clarify the UK’s relationship with the European Union, but marks the start of a new set of challenges, in which the country will have to negotiate its own trade agreements outside the EU.

Impact on the insurance industry

The dynamics of the global economy continue to shape developments in the insurance industry, and in the Non-Life and Life Protection segments in particular, which are slowing. The widespread application of accommodative monetary policies is helping to curb this trend and could help reverse the situation, but it has anchored interest rates at low levels. Together with the slowdown in economic growth, this situation has hampered development of the traditional Life savings and annuities businesses. However, buoyant stock markets have proved a stimulus for Life insurance products in which policyholders assume investment risk.

The outlook for emerging economies is generally beginning to look more upbeat. The economic situation in Brazil and Mexico is improving, benefiting their respective insurance markets.

You can read the full Outlook report here.