Re-engineering the current stereotypes: What fiscal policy makers aspire?

Cairo- Friday, 13th November 2020 (The Arab Digital Media Journal):

While Covid19 numbers are rising to reach more than 54 million infections and pharmaceutical companies are racing to authorize their vaccines with the recent Pfizer vaccine 90% effectiveness declaration, the current global economic outlook is still vague but not gloomy anymore.

The global reset notion comes to add more burden on the shoulders of the fiscal policy makers as the IMF and the World Bank are adopting easing debt agenda which will pose a threat even to their estimated 3.3% global economic growth this year.

Fiscal policy makers are eyeing goldilocks, inflation, unemployment, national debt, oil prices, tax rates and other indicators to issue their final verdict about the interest rates, stimulus plans, and other economic factors which will determine the fiscal policy course for at least 3 months scale.

The following brief showcases the features of fiscal policies pursued in key central banks which are pivotal to the global economic performance.

Fiscal policy2020 trends:


In US:

The 2 Trillion USD announced bill, 617 billion of them will be allocated for the government spending, proposed by the president Joe Biden and the Democratic party is still pending due to the Republicans are expected to retain the Senate majority as they showing resistance in Georgia and the judiciary interruptions of Donald Trump to a smooth transition of power.

The controversy revolves around adding some infrastructure spending to the bill which on the other side should be allocated to defeat the virus and provide incentives to the SMEs and to reduce the national debt.

This situation represents a ‘stick in the wheels’ of the Federal Reserve till January 2021. This was the reason Jerome Powell could not highlight new policies. Generally, since August the Fed officials are sticking to Zero interest rate.

Overall, The 80 billion USD Treasurys, the 40 billion USD and other precautions since March were helpful to curb the current market dysfunction but are not enough on the short to the medium run.

Jerome Powell

In EU:

The situation in on the European front is different and the stakes are higher as U.K which is still trying to find its course after a bumpy Brexit and a closure due to the Covid19 second wave.

The Johnson government works on reforming the immigration and employment system to ensure the smooth flow of capital investments in UK and continue supporting businesses.

The general outlook of the fiscal policy announced today by the ECB chairwoman Christine Lagrade focuses on digital payments and cutting interest rate and a 3 years operation 1.699 bn Euros ‘TLTRO-III’ to the banking system.

Christine Lagarde

In japan:

To assert his ideas about transformation in the post Shenzo Abi era, The current Prime Minister Yoshihide Suga announced boldly in the 6th of October that the Council on Economic and Fiscal policy will operate as his ‘command center’.

The Council will address some pressing issues notably, creating a flow of people from crowded areas to the rural ones which will require another packages for the small and the medium enterprises.

Yoshihide Suga

The council is also considering other challenging issues such as promoting the teleworking and distance learning, Zero greenhouse gas emissions by 2050 and other infrastructure investments.

In China:

While there are predictions that the trade war between the US and China will end, China is moving to implement its 14th FYP 2035 to maintain its economic growth, accounted 16.3 percent of the global GDP in 2019 and exceeds 100 trillion yuan this year, which will help the Chinese economy to transform from investment to consumption especially on the domestic level, according to Axel van Trotsenberg, the managing director of operations of the World Bank.

The main drivers to implement this plan is innovation, green development, deepen supply-side structural reform and break down the institutional barriers. In the 3rd quarter, the GDP fell to 4.9 due to the slow recovery of the services sector. (The forecast was 5%). Retail sales is expected to boost the 4th quarter growth to 6%.

In the emerging markets:

The IMF in a recent study addressed some of the challenges obstacles to maintain the growth of the emerging economies made for two decades, most of them revolve around the poverty reduction, vocational training and work from home issues.

The forecasts concentrated on ‘more welfare through policy actions’ is key to avoid a setback in these countries by promoting financial inclusion, relaxing jobs eligibility criteria for the unemployed and solidifying the social assistance system.

Most forecasts to the GDP in the emerging markets were generally negative with few positive ones for some countries like India as Moody’s rating which raised its forecast of India GDP growth this year and in 2021 to reach 8.6% from 8.1%.

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