The Bank of Korea predicted that the financial expansion of the Joe Biden government would have a positive impact not only on the US but also on the global economy as a whole.
On the 24th, the BOK released a report on’Analysis of the main contents and ripple effects of the new government’s fiscal policy by Biden’ and made this announcement.
According to the report, the characteristics of the Biden government’s fiscal policy are summarized as △active economic stimulus to respond to the novel coronavirus infection (Corona 19), △expanded investment in infrastructure (infrastructure) and manufacturing △financial financing through issuance of large-scale government bonds.
The BOK said, “After the establishment of the Biden government, an active fiscal expansion has predicted a shift in policy stance, and additional stimulus measures will alleviate the contraction in consumption during the first half of this year. After 2022, infrastructure investment will have a positive impact on growth.” Expected.
He added, “The new government’s fiscal expansion will lead to an increase in the demand for imports in the US due to the activation of US consumption and investment, which will have a positive impact on the US economy as well as the global economy.
President Biden led the passage of an economic stimulus package worth $900 billion at the end of last year when he was elected, and recently introduced an additional fiscal stimulus plan worth $1.9 trillion. The BOK predicted that $900 billion will be executed at the beginning of the year until the vaccine is effective in earnest, thereby serving as a bridge to economic growth.
In addition, it is expected that major policy pledges such as infrastructure investment and tax increase will be implemented from 2022 through the realization of’Blue Wave’ (the White House and the Senate and House take over the Democratic Party).
Moody’s, an international credit rating agency, analyzed that the annual average growth rate during the term of President Biden (2021-2024) would be 0.7 percentage points higher than the parliamentary branch scenario of both parties due to the influence of Blue Wave.
The BOK said, “It is unlikely that a surge in government debt, which some are concerned about, as the size of the actual fiscal execution is expected to be smaller than that of the initial pledge,” and said, “Since the structural low interest rate continues, in the short term. It is very unlikely that it will cause a fiscal crisis.”
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