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December 3, 2020

Fathom’s Recovery Watch Chart 02.12.2020: Pivot to fiscal stimulus during crisis

by Fathom Consulting.

Policymakers across developed economies have responded to the economic impact of COVID, which triggered the steepest recession of all time, with correspondingly massive policy stimulus. With monetary policy already extremely stimulative, the bulk of the new stimulus had to come from fiscal loosening, as the chart illustrates. That fiscal loosening was vital in mitigating the worst economic impact of the disease, and it will continue to provide much-needed support for growth even after effective vaccines become widely available in the New Year. The middle of next year is likely to see extremely strong growth across the developed world as a result – the risk is that policymakers are too cautious and withdraw the stimulus before the economy has fully recovered.

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