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11 May 2021

International Economy

President Biden’s first 100 days: US economy set for strong recovery, though its implication for global economy remains shrouded in uncertainties (Current Issue No.3221)


​Since Joe Biden's presidential inauguration, a slew of stimulus measures have been expedited to rejuvenate the US economy, which has been severely hit by the COVID-19 pandemic. Numerous stringent packages have been issued to curb the outbreaks, as well as accelerated COVID-19 vaccination efforts. These schemes have allowed economic activity to gradually return to normal. Additionally, a USD 1.9 trillion fiscal package has been passed, driving the US economy towards a strong recovery, as evidenced by a 6.4 percent QoQ annualized growth rate in 1Q21. This marks the highest growth rate since 3Q03, excluding 3Q20 which saw the US economy reach an all-time  high following the easing of lockdown measures nationwide. That said, the US economy is projected to grow 6.4 percent in 2021, restoring it to pre-pandemic level. Such a scenario would be favorable to Thai exporters as it would help to boost their earnings from US-bound exports in 2021, with projected growth of 7.8 percent YoY.

However, President Biden's 100th day address to the US Congress also holds significance for the global economy, which remains shrouded in uncertainties going forward. Concerns have been raised over an overheated US economy, which has been bolstered by a large-scale fiscal stimulus and implementation of quantitative easing (QE) measures. This will prompt market expectation towards that the QE tapering that would occur sooner than what Fed anticipated earlier, leading to a potential rise in government bond yields. Moreover, the expedited fiscal measures may also lead to tax increases for wealthy individuals in order to reduce fiscal deficits. Nonetheless, it remains uncertain whether the US Congress will approve such measures. Ultimately, President Biden may have to relent on matters such as reduction of stimulus limits and the rate of  tax increase. If President Biden's tax hike proposal fails to materialize, the US fiscal deficit will soar and generate concerns over fiscal sustainability, which will consequently raise US government bond yields. With regard to US foreign policy, the main focus will be on technological competition with China – as technology is a major thrust for the global economy in this digital era -  as well as the establishment of foreign alliances to counter China's growing influence. These developments are expected to create a tense atmosphere for global trade and investment. For Thailand - with its relatively smaller size of economy, emphasis should be on maintaining a balance between the two superpowers.

International Economy