IMF says US economy is growing at fastest pace since 1984

The US economy will exceed its pre-pandemic size as growth hits 6.4% this year, the IMF said, up 1.3 percentage points from the group’s forecast in January. The rebound will help the global economy grow by 6% in 2021, an improvement of 0.5 percentage point from the previous IMF outlook. The estimates are broadly in line with Wall Street expectations.

“At $ 1.9 trillion, the Biden administration’s new budget package is expected to provide a strong boost to growth in the United States in 2021 and deliver huge benefits for trading partners,” the IMF said in a report. . Other governments and central banks around the world have also injected billions of billions into the global economy.

There are already signs that the US recovery is gaining momentum. US employers added 916,000 jobs in March, the biggest gain since August. The US manufacturing sector is also on the move, with the ISM manufacturing index recently posting its best reading since 1983.

The IMF expects the coronavirus vaccine rollout and massive government stimulus to combine this year to produce the fastest annual growth rate in the United States since 1984 under President Ronald Reagan. But many other countries will have to wait until 2022 or 2023 to recover all the production lost during the pandemic. Global production growth will slow to 4.4% next year, according to the IMF.

“Multi-speed recoveries are underway across regions and across income groups, linked to stark differences in the pace of vaccine deployment, the extent of economic policy support and structural factors such as dependence on the vaccine. tourism, ”said Gita Gopinath, director of research at the IMF. “Diverging recovery paths are likely to create significantly larger gaps in living standards between developing countries and others.”

But some Asian countries will always overtake the United States. The IMF expects China, which was the only major economy to have avoided recession last year, to grow 8.4% in 2021, much more than the country’s official forecast of more than 6%. Production in India will increase by 12.5% ​​in the fiscal year through March 2022.

The IMF has recognized the continuation of government stimulus and vaccine deployments for stronger growth projections. He said consumer prices could be volatile, but he does not expect high levels of inflation to take root due to weak wage growth and unemployment.

Still, the IMF has warned that a “high degree of uncertainty surrounds” its projections, reflecting the wide range of potential coronavirus developments. “Greater advances with vaccinations may improve predictions, while new variants of viruses that elude vaccines may lead to marked degradation,” the group said in its report.

While advanced economies were hit harder than developing countries by the fallout from the 2008 global financial crisis, the IMF expects the opposite to be true in the pandemic. The group also said that young people, women and low-skilled workers were more likely to lose their jobs due to the coronavirus.

“Once the health crisis is over, policy efforts can focus more on building resilient, inclusive and greener economies, both to support the recovery and to increase potential output,” Gopinath said.