The global economy has less capacity to absorb a shock than it did in 2007, according to a study by insurer Swiss Re and the London School of Economics, with the Euro area seeing the biggest decline in economic resilience.
Having surveyed 31 countries, 80% of these had lower resilience than they did in 2007, at the onset of the global financial crisis.
This was caused by exhaustion of monetary policy options and a challenging operating environment for the banking sector.
The study found Switzerland, Canada and the US had the highest economic resilience while the Euro area had the worst.
The downturn for Europe reflected the fragile fiscal position of some European countries, labour market inefficiencies and underdeveloped financial markets.
Latin America was the only region to report consistently improving resilient, although this started from a lower base than other regions as its capital markets were less developed and it had low productivity.
Jerome Jean Haegeli, group chief economist at Swiss Re, said: “Considering the 35% probability of recession in the US next year and the global ramifications thereof, it is more important than ever to assess the underlying resilience of our economies and look beyond the traditional GDP measures.
“In aggregate, policy buffers against economic shocks today are thinner than in 2007. Ultra-accommodative monetary policy over the past years leaves limited future room to manoeuvre for central banks, while increasing their dependency on financial markets. Coupled with insufficient progress on structural reforms, this is likely to result in more protracted recessions in the future.”