Tight supply chains are taking a bite out of GDP numbers, stagnating economies across the globe while simultaneously pushing up prices. For anyone whose memories don't stretch back to the 1970s, the counterintuitive combination of a stagnating economy and rising prices is uncharted territory.
Still, we might be able to avoid partying like it's 1979.
A new report from Swiss Re Institute forecasts higher inflation and lower real GDP growth during 2022 and 2023. But, it adds, the stagflation will be cyclical.
That makes it different from the structural stagflation of the '70s, spurred by price shocks linked to oil embargos and, in the U.S., the bill for the Vietnam war coming due.
A slowdown in overall economic growth will ease inflation in 2023, but it will remain high compared with recent decades. And, the P&C insurance industry should expect claims inflation to affect profitability in 2022, leading to further market hardening in 2023, Swiss Re said.
