Munich Re’s Economic Research team predicts that global megatrends will affect macroeconomic conditions over the long term, leading to a decade of slower growth and higher inflation.
The firm forecasts average global economic growth of 2.5% and inflation of 2.2% in industrialised countries between 2025 and 2034, compared with 3.1% growth and 1.5% inflation from 2010 to 2019.
While globalisation, demographics, and digitalisation have driven growth and curbed inflation in recent decades, some of these forces are changing fundamentally, and new ones are emerging.
Munich Re highlights four key structural trends that are likely to influence the next decade.
First, deglobalisation is expected to slow economic growth and fuel inflation through weaker international trade and diminished cross-border integration.
The transition to a net-zero emissions economy, a key aspect of decarbonization, will put upward pressure on prices and, at least initially, slow economic growth.
Additionally, labor shortages, exacerbated by ageing workforces in many industrialised countries, will increase wages and inflation while hindering growth.
On the other hand, digitalisation is anticipated to be the only megatrend that supports the global economy, boosting productivity, driving growth, and curbing inflation.
Overall, these four megatrends are likely to impact growth and drive inflation. Given this, it is especially important that digitalisation can propel productivity gains and that policymakers establish conditions that enhance economic growth.
Munich Re stated, “The insurance industry must prepare for the risk of prolonged inflation that is even higher than already expected – which would have a particular impact on lines of business with long run-off periods, such as third-party liability.
“On a positive note, underlying changes in the global economy will also engender opportunities in the area of risk-transfer solutions with digitalisation, for instance, and particularly in cyber insurance.”
