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Don’t Overestimate the COVID-19 Recovery

At this point in the COVID-19 crisis, governments have only one good option: further aggressive fiscal stimulus, complemented by coherent virus-containment strategies. Without such policies, demand and confidence will remain subdued, and global growth will continue to falter well into the future.

WASHINGTON, DC – The world economy has risen from the depths of the initial COVID-19 plunge. But the recovery has been tepid, uneven, and fragile – and is likely to remain so for the foreseeable future.

Start with the good news. World merchandise trade has rebounded strongly, consistent with indications of a revival in household demand for goods in many economies, even as public-health restrictions and consumer concerns continue to hobble demand for services.

Moreover, financial markets have held up surprisingly well, with stock markets in many countries regaining or even exceeding pre-pandemic levels. Despite near-zero interest rates, banking and financial systems seem largely stable. And consumer and industrial demand has buoyed commodity prices, with even oil prices having recovered somewhat.

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