How the Stimulus Could Power a Rebound in Other Countries

Washington’s robust spending in response to the coronavirus crisis is helping to pull the United States out of its sharpest economic slump in decades, funneling trillions of dollars to Americans’ checking accounts and to businesses.

Now, the rest of the world is expected to benefit, too.

Global forecasters are predicting that the United States and its record-setting stimulus spending could help to haul a weakened Europe and struggling developing countries out of their own economic morass, especially when paired with a rapid vaccine rollout that has poised the U.S. economy for a faster recovery.

As Americans buy more, they should spur trade and investment and invigorate demand for German cars, Australian wine, Mexican auto parts and French fashions.

The anticipated economic rebound in the United States is expected to join China’s recovery, adding impetus to world output. China’s economy is forecast to expand rapidly this year, with the International Monetary Fund predicting 8.1 percent growth. That is good news for countries like Germany, which depends on Chinese demand for cars and machinery.

just begun to push infections higher in the United States — and a large policy response, including more than $5 trillion in debt-fueled pandemic relief spending passed into law over the past 12 months. Those trends, paired with the accelerating spread of effective vaccinations, seem likely to leave the American economy in a stronger position.

“When the U.S. economy is strong, that strength tends to support global activity as well,” Jerome H. Powell, the chair of the Federal Reserve, said at a recent news conference.

A year ago, it was not at all certain that the United States would gain the strength to help lift the global economy.

International Monetary Fund forecast in April 2020 that the U.S. economy might expand by 4.7 percent this year, roughly in line with forecasts for Europe’s growth, following an expected slump of 5.9 percent in 2020. But the actual contraction in the United States was smaller, and in January, the I.M.F. upgraded the outlook for U.S. growth to 5.1 percent this year, while the euro area’s expected growth was marked down to 4.2 percent.

I.M.F. has signaled that the estimates for the country’s growth will be marked up further when it releases fresh forecasts on April 6.

The recent relief package continues a trend: America has been willing to spend to combat the pandemic’s economic fallout from the start.

America’s initial pandemic response spending, amounting to a little less than $3 trillion, was 50 percent larger, as a share of G.D.P., than what the United Kingdom rolled out, and roughly three times as much as in France, Italy or Spain, based on an analysis by Christina D. Romer at the University of California, Berkeley.

Among a set of advanced economies, only New Zealand has borrowed and spent as big a share of its G.D.P. as the United States has, the analysis found.

In Europe, where workers in many countries were shielded from job losses and plunging income by government furlough programs, the slow pace of the European Union’s vaccination campaign will probably hurt the economy, said Ludovic Subran, the chief economist of German insurance giant Allianz.

On Wednesday, France announced its third national lockdown as infected patients fill its hospitals.

Mr. Subran also questioned whether the European Union can distribute stimulus financing fast enough. The money from a 750 billion euro, or $880 billion, relief program agreed to by European governments last July has been slow to reach the businesses and people who need it because of political squabbling, creaky public administration and a court challenge in Germany.

administered only about 1 vaccine dose per 1,000 people, if that, based on New York Times data. In the United States, the rate is more than 400 doses per 1,000 people.

Still, a booming American economy poses some hazard to other nations — and especially emerging markets — as economic fates diverge.

Market-based interest rates in the United States are already climbing, as investors, sensing faster growth and quicker inflation around the corner, decide to sell bonds. That could make financing more expensive around the globe: If investors can earn higher rates on U.S. bonds, they are less likely to invest in foreign debt that offers either lower rates or higher risk.

If the United States lures capital away from the rest of the world, “the rose-colored view that we are helping everyone is very much in doubt,” said Robin Brooks, chief economist at the Institute of International Finance.

trade tensions with Europe, which the Trump administration treated like an adversary. President Biden met online with European leaders last week.

The U.S. stimulus packages “will be part of the water that lifts all boats,” Selina Jackson, senior vice president for global government relations and public policy at consumer products company Procter & Gamble, said during a recent panel discussion organized by the American Chamber of Commerce to the European Union. “We are hoping for a calm slide out of this economic situation.”

Keith Bradsher contributed reporting.

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