Pandemic stimulus has backfired in emerging markets

Aggressive monetary and fiscal intervention added nothing discernible to developing countries’ recovery from the coronavirus crisis.

The Greek economy got an unexceptional recovery despite being at the top of the big spender list. PHOTO: BLOOMBERG

(FINANCIAL TIMES) - From the start of the coronavirus pandemic, many emerging nations watched the United States and other large developed countries "go big" on economic stimulus, and wished they could afford to follow. It turns out they were lucky if they couldn't and wise if they chose not to.

Emerging markets that stimulated most aggressively received no pay-off in a faster recovery, owing in part to the downsides of overindulging. The big spenders tended to suffer higher inflation, higher interest rates and currency depreciation, at least partly cancelling out the sugar high of stimulus.

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