A Promising Future for the US

Yesterday started Joe Biden’s administration with new challenges and opportunities. The global economy is in full recovery due to the pandemic and most countries are implementing measures to boost their economies. The American financial markets and global in general, reacted positively to the new government. The Nasdaq and the S&P recorded all-time highs.

Furthermore, many economic analysts are raising US growth forecasts between 3.5 to 6.5 percent per year. The US economy is likely to have fallen 3.5 percent in 2020. That is, the US economy is expected to recover in less than a year.

This is explained by expansionary fiscal and monetary policies. The fiscal support from the new government They amount to about 1.9 trillion dollars that include direct support to families of two thousand dollars, loans to SMEs, subsidies to the most affected sectors, among others. In addition, it is expected that the vaccination process will be more agile and faster, which will be beneficial to reactivate the services sector.

Regarding monetary policy, the Federal Reserve announced that it will maintain interest rate in a range of 0 to 0.25 percent for at least three years and that it will continue to buy financial assets to provide liquidity to the financial sector. This in an environment where the inflation rate is expected to be under control (the demand for dollars in the US is not only internal).

Biden's administration is betting on renewable energies and multilateralism. International trade is likely to regain the vigor it lost under Trump’s protectionist policies. The clean energy sectors will have a significant boost these years. The technology investment In these sectors, it will reduce energy prices in these sectors, which will generate greater competitive advantages.

Finally, a very substantial investment in infrastructure is expected, which will have a multiplier effect on its economy. All these measures will somehow spill over to Mexico, a country that, unlike the USA, is not applying fiscal measures to protect its population and SMEs. It will also be interesting if the Mexican government will rethink its energy strategy that relies on oil and fossil fuels.

Thus, a good year is coming for the US economy and that is good news for Mexico. The country’s growth engine will be external demand (especially manufacturing exports), which is closely related to the dynamism of the US economy.

Originally published in El Financiero.