The U.S. economy has led a global recovery from the coronavirus-induced slowdown, its “aggressive” fiscal stimulus helping it rebound at a faster pace than after the 2008 financial crisis, the Institute of InternationalFinance.
The world’s largest economy recorded the most comprehensive recovery, compared to other industrialized economies in the Group of 10, with consumption and investment in the third quarter of 2021 surpassing their levels at the end of 2019, the IIR said in its report. Global Macro Views.
“This remarkable achievement is mainly due to substantial fiscal stimulus, which eclipses in size what was done after the Great Recession,” the authors of the IIF report said.
The report also looked at the global recovery from the pandemic-induced slowdown and assessed 21 advanced economies and 23 emerging markets.
Last year, the US economy grew at the fastest pace since Ronald Reagan’s presidency in the 1980s, rebounding resiliently from the brief but devastating coronavirus-induced recession of 2020.
The country’s gross domestic product grew by 5.7% in 2021. This is the strongest growth over a calendar year since a 7.2% increase in 1984 after a previous recession.
The economy ended the year growing at a surprisingly fast 6.9% annual rate from October to December as businesses restocked, the US Commerce Department reported on Jan. 27.
According to the International Monetary Fund, the US economy grew by 5.6% last year. It is expected to increase by 4% in 2022, 1.2 percentage points lower than the IMF’s October projection. The fund expects US growth to reach 2.6% in 2023.
“The United States has staged a remarkable Covid recovery, especially as the pandemic is far from over,” the IIR said.
Real private consumption returned to pre-Covid levels in the third quarter of last year, a “truly remarkable feat never achieved in the wake of the 2008 crisis”, they said.
Fixed and residential investments in the United States also recorded “remarkable” recoveries.
“The United States also stands out from its G10 peers in terms of gross fixed capital formation, where it is again the best performer,” the IIF said.
However, the global economic recovery from the pandemic is “very uneven”, with a fall in investment weighing on medium-term growth prospects outside the United States, according to the IIF.
The euro zone appears to be heading for a major investment slump, comparable to what is happening in some emerging markets in Africa, South America and Asia, according to the IIF survey.
“The eurozone appears to have entered a cycle of divestment, comparable in severity to emerging markets such as South Africa, Colombia, Malaysia and the Philippines,” the IIF said. “This divestment cycle risks turning the Covid shock into a medium-term drag on growth.”
The eurozone is also “at the weaker end of the spectrum” compared to other G10 countries, in terms of real private consumption and gross fixed capital formation, according to the survey.
“It is true that the eurozone saw a more pronounced increase in investment before Covid, so perhaps part of the weaker picture now simply indicates overinvestment before the pandemic,” the IIF said.
“We are not inclined to believe this explanation, however, and see a growing risk that the euro area will enter a protracted investment crisis, which could extrapolate the Covid shock to lower medium-term growth,” they said.
Advanced economies, which would have seen 5% growth in 2021, are now expected to grow 3.9% this year, 0.6% less than expected in October, the IMF said in its latest report. World Economic Outlook report in January.
Growth is expected to moderate further to 2.6%, which still represents an improvement of 0.4% compared to previous forecasts.
Updated: January 28, 2022, 9:51 a.m.