As vaccination campaigns have started, 2021 sees the beginning of the end of the pandemic. After China, the US and Switzerland are the next economies to reach pre-crisis levels. Slack in the global economy limit upside inflation risks for the moment.
Chart of the month
An unprecedented amount of money has been spent or put aside for fiscal policy measures to cope with the current crisis. In Switzerland, the fiscal stimulus in 2020 exceeds the amount spent during the great financial crisis in 2008 by a factor of 20, Germany’s fiscal package is an estimated ten times larger this time. Lessons learned from Japan suggest that the announced amount of spending packages tends to exaggerate the actual money spent in hindsight. Yet, the size of the discretionary fiscal response to the COVID-19 pandemic remains gigantic. With monetary and fiscal policy working in the same direction, long-term inflation risks are now more significant than ever over the past 20 years.