The global economy is recovering gradually as many countries use expansionary fiscal and monetary policies to strengthen COVID-19 containment measures and accelerate economic recovery. Meanwhile, concerns are growing over potential risks to the global economy, such as inflationary pressures from quantitative easing and increased fiscal spending in major advanced countries and rising production costs due to disruptions in global supply chains. This report examines the global economy, economic trends of major countries, and potential risks linked to COVID-19 and liquidity expansion.
Both developed and emerging countries showed signs of economic recovery in 2021. In the first half of 2021, the unemployment rate increased year over year in major advanced and emerging countries, excluding the United States. A comparative analysis of each country’s COVID-19 response indicated that the more advanced the country, the greater the scale of economic stimulus and expansionary fiscal and monetary policies. Therefore, the US, Germany, the United Kingdom, and other major advanced economies with strong COVID-19 responses may experience additional inflationary pressures. Financial stability may worsen in some emerging economies as monetary policy normalizes. Lastly, this analysis found that increased liquidity aggravates income inequality, but the practical significance was estimated to be small.