Of the 2.9 trillion dollars to stimulate the U.S. economy as part of a package of measures CARES, $ 500 billion is necessary for the program of small business support Paycheck Protection Program. Similar steps to support their economies and undertake the Central banks of other countries. The total amount of balance of all leading Central banks at the moment is estimated at 22 trillion dollars by the end of the current year is projected to increase to 30 trillion, notes McKinnon. But all these measures are fast V-shaped recovery of the global economy?
the global economic Recovery will be gradual: if we denote literal terms, it is a cross between a V-shaped rapid recovery and L-shaped stagnation, says the chief analyst of “Sovcombank” Mikhail Vasiliev. The process of recovery in the global economy will take several years, with a possible drawdown in case of new waves of coronavirus. The main impact of the virus occurred in the services sector, which is recovering heavier and slower than the production, says Vasiliev.
According to him, the lack of medicines and vaccines against coronavirus, the risks of a second wave of infection, social distancing and the loss of income may lead to changes in consumer behavior and the restructuring of the global economy. The world economy will be reconstructed in the direction of greater digitization and transfer of many processes online.
to Slow down the global economic recovery may aggravation of confrontation between the U.S. and China, says the analyst. “We expect that the contradictions between the two largest economies in the world will increase in the coming years. Given the significant intertwining of the economies of the US and China, the separation process will be gradual and painful for the world economy”, – said Vasilyev.
against the background of global recession, the main growth driver of financial markets remains stimulative policies of the world Central banks and governments. A consequence of large-scale fiscal stimulus will increase budget deficits and increasing debt burden. In subsequent years, the high level of debt will constrain global economic growth.
At the same time, low inflation allows Central banks to pursue ultra-loose monetary policy. A side effect of monetary stimulus is inflating bubbles in financial markets. In this crisis, the fed quickly lowered interest rates to zero and announced an unlimited program of buying assets. The balance of the Federal reserve is growing at an unprecedented rate, flooding financial markets with cheap liquidity. For three months the fed’s balance sheet grew by 70% and exceeded 7 trillion dollars, it is 33% of the US GDP.
the Unprecedented stimulus measures help to solve problems in the real economy in the perception of investors, emphasizes Vasiliev. In addition, the stock ��wins back market expectations of global economic recovery as easing quarantine restrictions. In this month most of the restrictive measures will be lifted in the United States, Europe, Asia and Russia. “Data on the US labor market showed that in may the world’s largest economy back to creating jobs and reducing unemployment. The index of business activity for may pointed to a slowdown of the decline in the United States, Europe and Russia and recorded a growth of activity in China. Also positive for investors is the concerted action of OPEC countries, which helped to stabilize the oil market” – lists Vasiliev.
In his opinion, in the coming years Central banks will maintain ultra-loose monetary policy. Global disinflationary trend allows them to keep rates low, which reduces the cost of debt service for governments, companies and citizens. A policy of incentives monetary authorities will boost the prices of financial assets. In the case of new crises, the Central banks uses all the known tools, including unlimited purchases of assets, the flooding of markets with cheap liquidity and “helicopter money”, the expert believes.
