April 17, 2021

A K-Shaped Recovery, This Time on a Global Scale

If their growth lags badly, the fact that big economies like the United States are accelerating could compound the pain. A stronger American growth outlook is already pushing up market-based interest rates on U.S. government debt. As that happens, it attracts capital from abroad, making borrowing more expensive in already-weak economies and risking currency volatility.

Researchers at the I.M.F. pointed out in a recent blog post that it was important that rates on U.S. debt are rising because of a strengthening economic outlook, one that will benefit many economies by stoking demand for their exports. Still, “countries that export less to the United States yet rely more on external borrowing could feel financial market stress.”

Most U.S. officials have focused on how stronger domestic growth could actually help the rest of the world as American consumers buy foreign goods and services. “This year the U.S. looks like it’s going to be a locomotive for the global economy,” Richard H. Clarida, the vice chair of the Fed, said during a recent speech.

Ms. Yellen made a similar argument on Tuesday during a panel discussion at the I.M.F., at which she urged countries not to let up on fiscal support.

“Stronger growth in the U.S. is going to spill over positively to the entire global outlook and we are going to be careful to learn the lessons of the financial crisis, which is ‘don’t withdraw support too quickly,’” she said.

There are risks that spillovers could work the other way — slower vaccination progress abroad could come to weigh on American and global improvement. While roughly 500 doses of the vaccine have been administered per 1,000 people in the United States, based on New York Times vaccination data, that number is about 1 per 1,000 in Mali and Afghanistan.

Article source: https://www.nytimes.com/2021/04/06/business/economy/covid-world-economy.html

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