Uncertainty is the lack of certainty, according to the Royal Spanish Academy (RAE): the absence of secure and clear knowledge of something, either due to insufficient information or having none at all. In both cases, it generates a lack of confidence and security, which can lead to a paralysis of action and deterioration. <\/p>\n
A group of economists from the International Monetary Fund and Stanford University have been developing a World Uncertainty Index (WUI) for years. In all likelihood, it will come as no surprise to anyone that its level reached historic highs with the start of the health crisis a year ago and that, despite decreasing in recent months, it remains 50% above its average levels. If we start from the premise that uncertainty conditions the spending and investment of economic agents, which are the foundation of economic growth, the very short-term forecasts do not seem very encouraging. <\/p>\n
And how could it be otherwise when even major global uncertainty factors such as Brexit and the instability caused by the US presidential elections have been dwarfed by the magnitude of the pandemic. In this world where events typical of science fiction films have not stopped occurring lately, the hope generated by vaccines has allowed for a 60% drop in the WUI, as eradicating COVID-19 is the global priority. <\/p>\n
Fighting uncertainty is the mission of the entire planet: a race against time to immunize the population against the virus and to make rapid and decisive decisions to mitigate its economic and social effects while laying the foundations for economic reconstruction. In the first case, it is essential to inspire confidence and a sense of security, while also underscoring each individual\u2019s utmost responsibility for protection. In the second case, it is vital to protect families and businesses, and to strengthen the fundamental role of sectors such as the financial sector, which were key during the pandemic and will undoubtedly continue to be so in the future economic recovery. <\/p>\n
We all hope that the WUI will continue to fall in the coming months, a trend that will mark the beginning of the end of the virus and the return of economic optimism. But beyond wishes, we must consolidate the decline in uncertainty through decisions supported by well-founded strategies that, above all, are implemented. To achieve this, we start with the advantage of international collaboration that has failed so many times in the past, but is now bearing fruit. This collaboration has been evident both in vaccine research and access, and in the consistency of the economic policies developed so far, including the strong expansion of liquidity and the loose financing conditions established by the main central banks and the expansionary fiscal policy that the IMF estimates at nearly $14 trillion. <\/p>\n
Fiscal expansion covers lost income during the pandemic, but it must also contribute to boosting sustained growth and facilitating the transformation of the production model toward a greener and more digital economy. The public-private collaboration that has worked so well since the start of the crisis is key to achieving this. Furthermore, the efficient management of resources must be accompanied by reforms that increase productivity and potential growth. An example of all this is the European Recovery Plan, which is funded by the European Commission’s medium-term budget and the ‘Next Generation EU’ funds. <\/p>\n
In parallel, authorities are called upon to design a medium-term strategy that reduces the risks and vulnerabilities generated by the expansionary measures applied, such as high public debt or negative official interest rates. Because fighting current uncertainty must not, under any circumstances, lead us to create new sources of uncertainty in the future. <\/p>\n