(Bloomberg) --
Contrary to conventional wisdom, the euro zone will benefit more from fiscal stimulus this year than the U.S., according to UBS Group AG.
Arend Kapteyn, global head of economics and strategy research, says directly comparing the size of U.S. President Joe Biden's $1.9 trillion package with the euro area's mish-mash of national measures and its 750 billion-euro ($885 billion) joint recovery fund misses the point.
“What matters for GDP growth is the change in fiscal stimulus” compared with the previous year, he wrote in a report. “Although the U.S. has approved very sizable stimulus, a large part of that merely replaces last year's stimulus.”
Kapteyn also says only about two-thirds of the U.S. aid will be disbursed in 2021, and that some of the euro area's 2020 spending will actually fall into this year.
The bottom line, he reckons, is that the U.S. has a positive fiscal impulse of 0.5% of gross domestic product this year, while the euro zone has twice as much.
Both are far better than the global figure of -1.1% of output, according to the UBS Global Fiscal Stimulus Tracker.
Kapteyn says that fiscal drag should be easily offset by private-sector growth, so long as vaccination programs are successful and mobility restrictions are lifted.
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