The International Monetary Fund, on Tuesday said, President Joe Biden’s $1.9 trillion stimulus package would boost the US economy, powering faster global economic growth in this year, CNN reported. It added however, that many countries would continue to suffer from the pandemic and ran the risk of lagging behind.
US economy On Track For Fast Paced Growth: IMF
The IMF added the US economy would surpass its pre-pandemic size with growth hitting 6.4% this year which was 1.3 percentage points higher from what it had forecast in January. The global economy’s expansion would be helped 6% by the rebound in 2021, a 0.5 percentage points upgrade from its previous outlook. The estimates broadly aligned with expectations on Wall Street.
The IMF said in a report that at $1.9 trillion, the new fiscal package of the Biden administration was expected to strongly boost growth in the United States in 2021 and offer trading partners sizable positive spillovers. Trillions had also been pumped into the global economy by central banks and other governments around the world.
According to the IMF, the policy response to the pandemic meant the recession would inflict smaller damage than the global financial crisis did in 2008. According to the estimates of the group global output receded 3.3% in 2020, with the US economy shrinking 3.5%.
There were signs already of the US recovery gaining momentum. American employers reported 916000 job additions in March, the highest gain since August. The US manufacturing sector too was on a roll, and the ISM Manufacturing Index posted its best reading recently, since 1983.
According to the expectations of the IMF, the coronavirus vaccine rollout coupled with the massive government stimulus would produce the fastest rate of annual growth that the United States had seen since 1984 under President Ronald Reagan. However, many countries would need to wait until 2022 or 2023 for recovery of all loss of output due to the pandemic. The IMF predicted global output growth would slow to 4.4% next year.
According to Gita Gopinath, director of research at the IMF, multispeed recoveries were underway across regions and across income groups, stemming from stark differences in vaccine rollout pace, the amount of economic policy support, and structural factors including reliance on tourism. She added the divergent paths of recovery would likely leave significantly wider gaps in standards of living vis-a-vis developing countries and others.
According to commentators, the upgraded US forecast meant the biggest economy in the world was on track for quicker growth this year than many other developed nations. As per the estimates of the IMF 19 countries that used the euro as could look to a growth of 4.4%. Meanwhile Europe continued to battle another Covid surge that had seen France, Germany, and Italy tighten restrictions. In Japan output was expected to expand 3.3%.
However, some Asian nations would outpace the United States. The IMF expected China, the sole major economy that had managed to avoid recession last year, to clock 8.4% growth in 2021 — much stronger that the official forecast of the country of over 6%. The output in India was expected to expand 12.5% in the fiscal year to 2022 March.
The IMF credited vaccine rollouts and continued government support for projections of stronger growth. It added that consumer prices could be volatile, but it discounted the possibility of high levels of inflation taking root due to the unemployment and weak wage growth.
However, in a note of caution, the IMF said its projections were surrounded by a high degree of uncertainty, over wide-ranging potential coronavirus developments. It said the projections would be boosted by greater progress with vaccinations, while new virus variants that evaded vaccines sharply downgrade them.