‘There is no alternative’ S&P says governments must spend to support

According to economist S&P Global Ratings, as the coronavirus pandemic exacerbates the slowdown in the global economy, governments around the world have no choice but to increase spending to support businesses and households next year.

Many governments have announced significant financial support since the pandemic. But some countries, including the United States, have demonstrated «fiscal fatigue» and are considering reducing some incentives, noted Shaun Roache, Chief Economist for Asia Pacific at S&P Global Ratings.

«We are seeing some fiscal policymakers think about canceling some of their measures, or perhaps expiring without renewing them, and this is a pretty dangerous thing when demand in the rest of the economy is still rather subdued.», – he said on the air of the CNBC program «Squawk Box Asia» on Monday.

«Thus, we expect and hope that some of these fiscal measures will resume next year. This would mean more fiscal easing, but at the moment there is no alternative.», – he added.

Roach explained that the additional spending would worsen government balance sheets, but «prevent a worsening of the situation». This is especially true when authorities have to take action that stifles economic activity to contain the spread of the coronavirus, given the lack of an obvious medical solution to the problem, he added..

S&P Global Ratings: there is simply no other alternative but to spend on supporting the economy

S&P Global Ratings earlier this month lowered its forecast for the global economy. Global gross domestic product is now expected to contract 3.8% this year – worse than the previously projected 2.4% decline.

The global economy is projected to recover by an average of 4% in 2021-2023, but the level of economic production in almost all countries is expected to remain below the 2019 level for several years, the agency said in its report..

«So we will not get to where we would have been in the absence of the virus, and to a large extent that reflects the great damage that has been done … to the labor markets, but especially to the balance sheets, and it will not easy or quick fix», – said Roach.

Recall that July 19 international rating agency S&P affirmed and retained Russia’s sovereign rating. Agency analysts expect the Russian economy to contract by 4.8% by the end of 2020.

S&P Global Ratings: there is simply no other alternative but to spend on supporting the economy

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