- President-elect Joe Biden will likely have to work with a Republican Senate majority, limiting his ability to implement the Democratic fiscal agenda. Nevertheless, we expect a $1 trillion stimulus package, potentially enacted before his inauguration on January 20. This is less than half of what we might have seen under a Democratic sweep, but it should suffice for a small positive fiscal impulse to US growth in coming quarters.
- More important for the growth outlook is the second wave of coronavirus infections that is now sweeping the United States and especially Europe, where governments have already reacted with renewed partial lockdowns. This has led us to downgrade our Q4/Q1 GDP estimates on both sides of the Atlantic; in fact, we now expect the European economy to contract significantly in Q4. These revisions have brought down our 2021 global GDP forecast to 6.0% (vs. consensus of 5.2%) and the near-term risks remain on the downside.
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