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ECONOMY| 21.01.2021

The Biden Administration: Recovery, Global Agenda, and Multilateralism

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The recent MAPFRE Economics Panorama report highlights that the expected recovery of the economy will take place in a new context characterized by profound changes among its protagonists. At the head of the world’s superpower, the United States, Joe Biden takes control and is expected to immediately reverse many of the policies of his predecessor, Donald Trump.

According to MAPFRE’s research arm, “it is foreseeable that the new US administration will focus on greater fiscal progressivity, an ambitious investment program in infrastructure and education, the return to the Paris Agreement on climate change, reactivation of a health program similar to the Affordable Care Act, a return to multilateralism under the commitments abandoned by Trump, and a different narrative in form, but with similar content, with respect to China.”

A return to the approach underpinned by a global agenda and multilateralism, more pressing than ever in the wake of the disturbing events witnessed in the assault on the Capitol, which sought to prevent handover of executive power in an orderly transition.

 

A power intent on moving forward

Within the central scenario of the report, the world economy is set to emerge from recession at the end of the first half of 2021, assuming that outbreaks of coronavirus are contained and no further lockdown measures are required. Leading the pack is the United States, with a foreseeable recovery in GDP to levels similar to 2019 by the end of this year, within the baseline scenario, “thanks to significant public transfers that have so far accounted for more than 15 percent of GDP, to the diversification of its economy and greater laxity in the imposition of measures with respect to the previous Administration.”

The estimated economic growth for the United States in 2021 would thus fall within a range of between 3.9 percent (baseline scenario) and -0.2 percent (stressed scenario), after seeing its 2020 GDP fall by close to 3.5%. The report includes a specific chapter on monetary policy, specifying the Fed’s embrace of greater direct fiscal stimuli, which will be partnered with sufficient monetary accommodation and without any obvious limit. The election of Janet Yellen as the next Secretary of the Treasury confirms this attitude.

Risks will abate

With a new administration in place in the world’s largest economy, the analysis concludes that “certain risks related to foreign policy are reduced, as a more transparent, multilateral and calm approach is expected”. However, as MAPFRE Economics has anticipated in its studies, inherited geopolitical tensions will persist, such as trade tensions with China, which look set to continue, though with less volatility.

On the national horizon, disputes are expected on major issues such as climate change, immigration, the health system and fiscal policy. Much-improved civility is expected to return to relations between the US and the EU, set against the backdrop of their status as technological, geopolitical and commercial strategic rivals.