In the United States, monetary policy is much broader: “fiscal stimulus” indicates a stimulus to the economy of 5-6% of GDP in the United States and the eurozone by 3 points. Analysis by economist Fidel de Novelis, head of the Congolese Ref
The possibility of reducing the spread of the disease opens up the possibility of the gradual removal of restrictions on behavior, with positive effects on the effectiveness of US economic activity. In fact, all current forecast scenarios dismiss a phase recovery at a relatively brisk pace once restrictions are relaxed.
The second quarter in the United States is already characterized by a strong acceleration of GDP, while the reversal in the euro area to the third quarter is caused by the expected acceleration in the vaccine campaign. This means that the eurozone economic cycle may be out of phase with the American. In this regard, the most recent economic indicators confirm the recovery of production in the United States and the eurozone.
It characterizes the entire world economy as a result of the progressive removal of restrictions on the purchase of goods after the first lock, followed by a phase of filling warehouses, which was greatly reduced during that period.
In some cases, like consumer electronics or furniture, the trend is exacerbated by the restructuring of global demand for goods from services.
On the other hand, with the data for the spring months, the economic situation is likely to change following the most obvious recovery in the United States. In fact, growth will be much more exciting as long-distance operations are reduced, especially in the service sectors.
Among the factors that lead us to believe that there will be more gaps in US growth compared to the euro area, there is also a different approach to budget policies.
In 2020, the crisis affected the general budgets of all countries, mainly due to the direct impact on the arrears due to the fall in revenue, and followed the measures taken by governments to support the economy.
However, the former post-measurement of monetary policy adopted in various countries shows that US monetary policy is much broader: “financial stimuli” calculated on the basis of changes in the structural primary equilibrium show a stimulus of 5-6% of GDP in the United States and 3 points to the economy in the euro area.
Before the crisis, the United States already had a much larger deficit than the euro area (the US general deficit in 2019 was 6.7 percent of GDP, compared to an almost equilibrium balance in the euro area).
So the 2020 increase has brought the US deficit to 15 percent of GDP, which is 8.5 percent in the eurozone.
Many of the measures adopted by governments last year are of an interim nature; That is, they have a temporarily defined duration. For this reason, governments will need to take action to refinance this type of intervention by 2021 (e.g. what happened to Italy in Italy Supports DL). In fact, the prevailing approach in the euro area is to “follow the economic cycle” or refinance these types of measures until the epidemic is over. Therefore, with vaccination campaigns at an advanced stage, a lot of public budgets need to be improved, which will benefit from the effects of the recovery and the failure to renew support measures.
Under this kind of structure, it is understandable that the general financial balances for 2022 will be stronger than we would expect to recover in the coming quarters. In recent months, however, a different approach between the United States and the eurozone has emerged in terms of monetary policy. In the United States, despite significant progress in vaccination campaigns, this year’s budget policy to provide a comprehensive impetus has boosted economic prospects.
In particular, a set of measures for a total of $ 900 billion (Response and Relief Act), already equivalent to 4 percent of GDP in the United States by 2020, was initiated by the previous administration. The stimulus adopted by Biden (US Recovery Program) is equivalent to 1900 billion or 9 percent of US GDP, of which more than 621 must apply by 2021.
The result is that the U.S. deficit will again be 15 percent of GDP this year. In the euro area, as we have seen, it seems that new tax sets will be launched by various countries in the coming months, but in any case we will not exceed the 2020 level.
For this reason, the distance between the United States and the euro area will be significant in terms of general deficit levels. Starting from these levels of general deficit, the ratio of public debt and GDP to the euro area as a whole will continue to rise this year, reaching 104 percent of GDP, while the proximity of the United States to 135 percent of GDP.