(Bloomberg) -- Global governments are doing the most to propel the world economy in a decade just as growth slows.
As leaders from the Group of 20 prepare to meet this week in Argentina, JPMorgan Chase & Co. economists calculate easier fiscal policy will add 0.3 percentage point to global gross domestic product next year, the biggest impulse this decade.
That’s a reversal from the 0.4 percentage point that was removed on average each year between 2010 and 2016 as most governments turned to austerity once economies started growing again in the wake of the financial crisis.
The policy switch is timely as central banks such as the U.S. Federal Reserve look to end the loose monetary policies they deployed to cushion the fallout of the turmoil which pushed the world into recession in 2009.
"A marked shift in global fiscal policy is underway," JPMorgan Chase economists led by Bruce Kasman wrote in a recent report to clients.
China is using tax cuts and infrastructure spending to underpin demand. In Europe, the U.K. plans to increase spending while Spain and Italy are among those leaning on fiscal policy. The U.S. is already relying on tax cuts to prop up demand although their influence may soon fade.
In its latest outlook released just last week, the Organization for Economic Cooperation and Development warned governments will need to be on standby with lower taxes and higher spending if the global economy again suffers a sharp downturn.
The ability to borrow may be limited. The International Monetary Fund said in a recent analysis that room to increase spending -- so called fiscal space -- is "not extensive" in the world’s two biggest economies, the U.S. and China, and it’s severely constrained in economies including Italy and Brazil. Argentina and Turkey are among the other G-20 economies monitored by investors for their debt burdens.
While public debt is high in a number of countries, fiscal policy may be the only cushion left given the depleted resources left at central banks, according to the OECD.
At Oxford Economics, economist Adrian Cooper says fiscal policy is one reason to believe that prospects for healthy global growth remain good. In the U.S., loosening may add to GDP growth again in 2019 and “continue to bolster job growth and consumer confidence as well as support healthy levels of business investment,’’ he said.
--With assistance from Fergal O'Brien.
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