E The OECD’s Latest Global Projections Are More Optimistic -- Perhaps Too Optimistic

The OECD’s Latest Global Projections Are More Optimistic, -- Perhaps Too Optimistic. The Large US Fiscal Stimulus Will Provide A Helpful Boost To Other Economies, Particularly Canada and Mexico.

“Global economic prospects have improved markedly in recent months, helped by the gradual deployment of effective vaccines, announcements of additional fiscal support in some countries, and signs that economies are coping better with measures to suppress the virus. Global GDP growth is projected to be 5½ per cent in 2021 and 4% in 2022, with global output rising above the pre-pandemic level by mid-2021. Despite the improved global outlook, output and incomes in many countries will remain below the level expected prior to the pandemic at the end of 2022. The significant fiscal stimulus in the United States, along with faster vaccination, could boost US GDP growth by over 3 percentage points this year, with welcome demand spillovers in key trading partners” (OECD, March 2015)

The world’s economic outlook has recently brightened, partly because of the successful rollout of covid-19 vaccines in some advanced economies, but as well, because of the huge $1.9 trillion fiscal boost which will be provided to the US economy.

According to the OECD, the world economy is set to rebound by 5.6% this year, and expand by 4% next year. Indeed, because of the new fiscal stimulus, US real GDP growth is projected to be 6.5% in 2021 and 4% in 2022.

And on a comparative basis, The US and Chinese economies are expected to bounce back faster than Europe and the UK, even as other regions may continue struggling until the end of 2022.

The importance of the new fiscal stimulus to the US economy and to other economies should not be overlooked since the fiscal stimulus will also boost GDP growth for the United States’ major trading partners.

That is, Canadian and Mexican GDP growth should be boosted by 0.5-1 percentage points, and the euro area and China should also experience between 0.25-0.5 ppts of extra growth this year. 

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William K. 3 weeks ago Member's comment

The effect of that big stimulus on me is to increase my savings in preparation for the hard times approaching when the bubbles will all burst. Of course my confidence level is very far down. While certainly some folks need financial help, I am NOT one of them, nor are my neighbors in need of help. The one just bought a nice new pickup truck, because it is really cool. But he did not need that check to help pay for it.

So the stimulus checks are the wrong thing to do. The right thing would help those folks who really need it, not me. All pf the pandemic closures have been inconvenient, but they have not done any damage here. THAT DAMAGE will come from the inflation that iis still down the block and around the corner. Coming, but we don't see it just yet.