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China and the USA lead global pandemic recoveries

China’s containment of the Covid-19 pandemic has been much lauded as the primary cause of its economic recovery. Meanwhile, predications of economic decline have abounded as America has been far less effective in managing the crisis. However, according to a recent report by the IMF, its economic recovery has been almost as successful and is forecasted to sustain fewer GDP losses than China in 2022.

Both economies are forecasted to achieve a sub -1.5 percent loss in GDP growth. Still, the US recovery and potential outperformance of China’s growth is surprising to many, given American's exposure to more protracted and severe crises. One of the primary reasons for this performance on the US part stems from fiscal stimulus, which vastly surpassed the stimulus applied by China and other economies. Furthermore, the US. also maintained a more relaxed containment policy relative to other countries allowing businesses to stay afloat.

The IMF Conducted this analysis before the Biden Administration’s planned $1.9 trillion stimulus package, which will likely improve the short-term growth picture. However, while American stimulus has guaranteed a more robust recovery, recent concerns about the large stimulus package crowding out investment and overheating the economy mean that the engine of recovery may end up stalling out.

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