Bank of Korea remains optimistic over Biden's fiscal expansion economic recovery

Bank of Korea Governor Lee Ju-yeol bangs a gavel during a key rate-setting meeting at the bank in Seoul on Jan. 15. Courtesy of Bank of Korea

By Lee Min-hyung

The Bank of Korea (BOK) has expressed optimism for the super-expansionary fiscal policy of U.S. President Joe Biden's new administration.

“The planned implementation of new pump-priming measures by the Biden administration will mitigate weak consumption in the first half of the year,” the central bank said in a report on the global economy, Sunday.

The BOK said hopes for a U.S. economic recovery would have a positive impact for a rebound of other major economies across the globe throughout 2021.

The administration's economic aid package worth $900 billion will serve as a “bridge” for economic revitalization before COVID-19 vaccines take full effect, according to the BOK report.

The central bank also remained hopeful that Biden's willingness for an expansion in infrastructure investment would bode well for the Korean economy.

Earlier, Biden pledged to inject $2 trillion for infrastructure projects in the automobile, transition into eco-friendly energies and high-efficient housing construction sectors.

Starting from 2022 when Biden's major pledges are expected to become a reality, the global economy will be able to begin a stable recovery, according to the report.

“The aforementioned expansionary policy will lead to revitalization of consumption and investment in the U.S., and this will increase demand for imports in the world's largest economy, helping activate the global economy,” the report said.

But the central bank also left open the possibility that it may take longer for a U.S. economic rebound if the side effects from the COVID-19 pandemic continue to remain in place despite the vaccines, or the Biden administration faces legislative hurdles in passing its major economic pledges. But the scenario is unlikely to take place for the time being, as Biden's Democratic Party has taken control of the House and Senate.