Not all pandemic recoveries are created equal.
the richest in the world Economies have taken different paths to recover from the devastating impact of COVID-19.
There are few bright spots at a time when multiple forces and crises are weighing down global economic growth, including wars, geopolitical tensions, the lingering aftershocks of the pandemic, high inflation and rising borrowing costs.
The US economy is one of them.US gross domestic product Growth in the third quarter was an impressive 5.2%, outpacing China, which has long been the engine of global growth.
“The US has performed really well compared to other countries over the past year,” Ines McPhee, chief global economist at Oxford Economics, told CNN.
The United States has outperformed the European Union, the United Kingdom, Japan, Canada, and other developed countries this year.
Last month, the Paris-based Organization for Economic Co-operation and Development became the latest intergovernmental organization to It revised up its growth outlook for the United States this year and next, while lowering its outlook for the 20 countries that use the euro currency.
This followed a similar move by the Washington-based International Monetary Fund in October.
The IMF currently expects U.S. GDP to expand by 2.1% this year and 1.5% in 2024. This is more than double the expected growth rate for the UK economy and well ahead of the eurozone, which is expected to grow by 0.7% and 1.2% this year. next year.
Differences in energy prices, pandemic-era stimulus, and the passing on of higher interest rates directly explain the differing fortunes of the world's most advanced economies.
But there are also long-term structural factors behind this divergence that give the United States an advantage. Still, the U.S. economy is widely expected to grow significantly slower in the final months of the year as pandemic savings decimate and borrowing costs remain at 22-year highs.
Claire Lombardelli, the OECD's chief economist, told reporters last week that the impact of last year's spike in energy prices was a major cause of the disparity between the U.S. and euro zone economies.
Europe, including the UK, is a net importer of energy, so inflation was higher in Europe than in the US. The UK and eurozone economies were heavily exposed to the soaring natural gas prices that followed Russia's full-scale invasion of Ukraine in February 2022, sending utility bills for households and businesses to record highs.
“Oil is a global commodity, but natural gas is regionally fragmented,” said Preston Caldwell, chief U.S. economist at Morningstar Research Service. “Natural gas prices did go up[in the U.S.]but they were much higher in Europe, where there was all sorts of rationing going on. It had a huge impact on production, but the Some of the effects remain.”
At the time, Germany was most affected by the energy shock due to its huge manufacturing industry and dependence on Russian gas. Output in Europe's largest economy contracted slightly in the third quarter, with many economists now predicting a technical recession, defined as two consecutive quarters of declining output.
fiscal and monetary policy
Officials on both sides of the Atlantic have unleashed fiscal stimulus to cushion the economy from the impact of the coronavirus, but the United States has done so on a much larger scale.
Generous government support, including debt A combination of changing spending patterns and a “refinancing boom” amid historically low interest rates are helping to pad Americans' coffers.
Savings accumulated during the pandemic Carsten Brzeski, global head of macroeconomic research at Dutch bank ING, said U.S. consumers were able to continue spending despite rising prices. This offset the negative impact of inflation on consumption, the main driver of the U.S. economy.
However, splurging may also have a downside.
While Americans have overused their piggy banks over the past few years, savings accounts in other countries have remained relatively neglected. Oxford Economics' McPhee said this could create future vulnerabilities for the United States.
moreover, The US has not yet felt the full impact of rising interest rates. Mortgage holders and business borrowers typically refinance less frequently. Monetary policy has taken longer to become widespread in the United States than in other countries. economy, mcphee Added.
The U.S. economy's growth rate rarely matches that of China. The world's second-largest economy has gotten off to a solid start to the year, emerging from three years of coronavirus restrictions. However, the recovery gained momentum in the April-June period due to weak consumer spending, sustained weakness in real estate and weak global demand for Chinese products.
country's Julian Evans-Pritchard, chief China economist at Capital Economics, said the economy could “completely stall” into the summer.
The economy has regained some momentum in recent months, with improving household confidence and accelerating retail sales, he said in an online briefing with journalists and investors on Tuesday.
A new acceleration in government spending to support the economy will also “provide some support.” However, Evans-Pritchard added that the country's huge property sector remains weak and exports, which have so far been “resilient,” may slow, weighing on growth.
“We think the economy will slow down again by the end of next year.”
In another sign of the bleak outlook for the world's second-largest economy, Moody's on Tuesday downgraded its government debt outlook from “stable” to “negative”, warning of a downgrade in China's credit rating.
The rating agency expects China's annual growth rate to slow to 4% in both 2024 and 2025, before averaging 3.8% annually from 2026 to 2030. By contrast, in the decade before the pandemic, China's economy was growing at an average of 7.7% a year. , according to BlackRock.
Meanwhile, India is expected to grow by 6.3% this year and next, according to the IMF, which will make it the world's fastest-growing major economy and a challenger to its neighbors.
The strong performance of the U.S. economy has defied expectations, but economists believe this is unlikely to continue.
Instead, the economy A slight slowdown is expected from this quarter to next year. Morningstar's Caldwell predicts the annualized growth rate favored by the United States. It was less than 1% in the second and third quarters.
“We're getting into low territory, but not negative territory or recession territory,” he said. “I think a recession is possible, but that's not my base scenario.”
Meanwhile, several major bank CEOs, including Citigroup Inc.'s Jane Fraser and JPMorgan Chase & Co. CEO Jamie Dimon, are warning that the U.S. economy could soon be on shaky footing.
But the picture looks brighter in the long term, with the US' lead over Europe likely to further strengthen in the coming years.
President Joe Biden's Inflation Control Act would direct $369 billion to clean energy projects, potentially attracting even more investment to the U.S., which is already one of the best countries for financing globally. There is sex.
According to OECD data, cumulative venture capital investment in the U.S. in artificial intelligence alone has reached nearly $450 billion over the past decade. This is more than double his investment in AI in China and nearly 10 times his investment in AI in the European Union or the UK.
Andrew Kenningham, chief European economist at Capital Economics, said the United States had achieved significant productivity gains, especially compared to Europe and the United Kingdom, due to a high concentration of innovative high-tech companies and the rapid adoption of new technologies. .
According to Kenningham, the United States is poised to take full advantage of advances in AI, and the gap could widen further.