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ECONOMY | 2021.01.19

Manuel Aguilera: “Recovery depends on five factors that indicated vulnerability even prior to the pandemic”

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“The recovery process depends on five factors that indicated vulnerability even prior to the pandemic.” Manuel Aguilera, General Manager of MAPFRE Economics, set forth this point of view at the start of the online seminar presenting the 2021 Economic and industry outlook report, which was organized by Fundación MAPFRE, publisher of the study for the fifth year.

According to MAPFRE Economics, the five factors on which the success of the recovery process depends are: the strength of health systems and the efficacy of the different vaccines; the efficiency achieved through economic policy measures during the pandemic; the sectoral structure of economies; previous structural economic vulnerabilities; and economic policy governance and implementation.

Gonzalo de Cadenas-Santiago, Director of Macroeconomics and Financial Analysis at MAPFRE Economics, and Ricardo González, Director of Analysis, Sectoral Research and Regulation for the company, elaborated on the analysis.


COVID-19 is changing the course of estimates

The experts explained, among other key points, that in 2021 the most developed economies will contribute most to the recovery of global GDP, as opposed to what had been happening, with the emerging economies contributing the most. In this regard, the pandemic has reversed trends.

MAPFRE Economics expects the global economy to grow by around 4.5% during 2021–2022, firmly propped up by the performance of developed markets, which will capitalize on the dual monetary and fiscal momentum.
The path to the “new normal” will, in the view of MAPFRE Economics, be guided by consumption recovery and will require monetary and fiscal policy to provide unprecedented levels of support.

De Cadenas-Santiago explained that we are at a turning point in terms of recovery. Given, the uncertainty posed by the virus, the report defines two scenarios: a base scenario and a stressed scenario. Both share common catalysts: infections and restrictions (negative, short-term) and vaccination (positive, long-term).

The recovery is also dual in nature, with a strong impact on expectations and activity. It is anticipated that emerging countries engaged in tourism and service-related activities will be worst hit. Growth will also come at different paces: Spain will lag behind other developed countries, bringing up the rear within the European Union. Recovery to the levels of the first quarter of 2019 is not expected for any country until the end of 2021.

Uncertainty on four key fronts

The analysis highlights four main types of uncertainty: epidemiological, financial, economic and geopolitical. COVID-19 is also “deepening rifts” in pre-existing imbalances.

2022: Absence of unknown risks

During the presentation, a risk mapping exercise was also set out: the known knowns, the known unknowns, and those inscrutable unknown unknowns that we were unable to anticipate.

The forecasts set out two growth bands for global GDP, between 5.2% in 2021 and 4.2% in 2022 in the base scenario, and between 0.9% and 4.7% respectively in the stressed scenario.

The insurance industry is suffering ‘less than in other crises’

The expected return to growth from the second half of this year will translate to the insurance industry, explained Ricardo González, although “uncertainty remains high and recovery is uneven.”
Two key aspects will influence the sector’s smaller decline in relation to past crises: Central banks’ expansionary monetary policies (low interest rates and a multitude of unconventional measures) and expansionary fiscal policies (unemployment aid, support for vulnerable groups, businesses and companies, infrastructure and investment projects, etc.).

Revival of GDP in 2021 may lead to a recovery of lost ground by the sector, especially in emerging countries, although this will be uneven across markets and business lines. With this recovery, González foresees “life insurance investment opportunities.” However, some markets, such as the Mexican and Brazilian markets, are experiencing a decline in premiums in real terms in 2021.
The report reflects the views of IAIS and EIOPA, the main supervisory organizations, who highlight “the operational and financial resilience of insurance companies during the crisis,” although both agree on the “persistence of uncertainties as regards the future outlook.”

Clara Bazán, Director of the Insurance and Social Protection Area at Fundación MAPFRE, moderated the meeting in which listeners participated from more than 20 countries. The event covered the three main aspects of the MAPFRE research center’s outlook report: a general overview of the crisis, characteristics of the expected economic environment for 2021, with forecasts of the main variables, and an estimated outlook for the insurance industry.

> You can view the interactive chart on the institutional response to the COVID-19 crisis and its effects on expected growth here