World economy grows by 1 pp when U.S. economy grows by 3-4 pp

The expenditure expansion of the Joe Biden administration, including economic stimulus plans and investment on infrastructure worth 5.9 trillion dollars, is projected to increase the world’s economic growth rate by up to one percentage point. 　

“The impact of the Biden administration’s fiscal policy on the U.S. and the world economy,” a report published by the Bank of Korea on Sunday, says the OECD estimates that the fiscal expansion of the U.S. would increase the economic growth of the country by three to four percentage points, which would in turn increase the world economy’s growth rate by some one percentage point. European countries, China and Japan would have their growth rate increased by 0.4 to 0.5 percentage point. 　

The Biden administration has been executing economic stimulus packages worth 1.9 trillion dollars since March and is planning to expand government spending by 5.9 trillion dollars over the course of 10 years to repair COVID-19 damages and for large-scale infrastructure investment projects.

“The increased economic growth rate of the U.S. would have positive ripple effects on other countries through global trade and expanded investment,” said the report. However, the report also pointed out, “It requires caution as the rapid fiscal expansion of the Biden administration could cause side effects such as triggering inflation and reducing private sector investment.”


Hee-Chang Park ramblas@donga.com