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Risk of US recession 35% by 2020: Swiss Re

Posted On: Jun. 13, 2019 12:52 PM CST


There is a 30% risk of a U.S. recession in the next 12 months, rising to 35% in 2020 as fiscal stimulus fades, Swiss Re Ltd. said in a report Thursday.

The threat is mainly due to external factors, “most notably potential escalation of the US-China trade war,” which “pose downside risks,” Swiss Re said.

The reinsurer said, however, that it does not see any substantial imbalances in the U.S. economy typical of “traditional” recession triggers.

Such a recession would “likely” be negative for insurers and reinsurers and could hurt both net income and capital, the report said.

Insurers and reinsurers are already considering de-risking, such as reducing weights on riskier assets like high-yield bonds and equities, according to Swiss Re.

Swiss Re also forecast a deceleration in gross domestic product from 2.9% in 2018 to 2.5% in 2019 and 1.6% in 2020.

The reinsurer pointed to the broad spectrum of opinion on the matter, citing a May survey of nearly 60 economists by Bloomberg that put the 12-month probability of U.S. recession at 25%,  but showed a range of views from 4% to 60%.