The IMF says the US economy is growing at the fastest pace since 1984

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The US economy will outpace its pre-pandemic size as growth reaches 6.4% this year, the IMF said, 1.3 percentage points from the group’s January forecast. The recovery will help the global economy expand by 6% in 2021, up 0.5 percentage points from the IMF’s previous outlook. Estimates are broadly in line with Wall Street expectations.
“At $ 1.9 trillion, the Biden administration’s new fiscal package is expected to give a strong boost to growth in the United States in 2021 and give trade parties considerable positive impacts,” the IMF said in a report. Other governments and central banks around the world have also pumped billions into the global economy.

The IMF said the “unprecedented political response” to the pandemic meant that “the recession is likely to leave smaller scars than the global financial crisis of 2008.” The group estimates that global production will fall by 3.3% in 2020, while the US economy will fall by 3.5%.

There are already signs that the US recovery is gaining momentum. US employers added 916,000 jobs in March, the highest gain since August. The US manufacturing sector is also rising, and the ISM Manufacturing Index recently recorded the best reading since 1983.

The IMF expects the launch of the coronavirus vaccine and the massive government incentive 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 production lost during the pandemic. According to the IMF, global production growth will slow to 4.4% next year.

“Multispeed is recovering in all regions and between income groups, due to strong differences in the pace of vaccine launches, the extent of support for economic policy and structural factors such as tourism dependence,” said Gita Gopinath, IMF director. “Divergent recovery paths are likely to create significantly larger gaps in living standards between developing and other countries.”

The updated US forecast means that the world’s largest economy is about to grow faster than many other developed countries this year. The IMF expects a 4.4% increase in the 19 countries that use the euro, while Europe is battling another wave of coronaviruses that has forced Germany, France and Italy to tighten restrictions. Production is expected to expand by 3.3% in Japan.

But some Asian nations will continue to overtake the United States. The IMF expects China, which was the only major economy to avoid recession last year, to grow by 8.4% in 2021 – much stronger than the country’s official forecast of more than 6%. Production in India will expand by 12.5% ​​in the fiscal year to March 2022.

The IMF has credited continued government incentives and vaccine launches for stronger growth projections. He said consumer prices could be volatile, but high levels of inflation are not expected to take root due to weak wage growth and unemployment.

However, the IMF warned that a “high degree of uncertainty surrounds” its projections, reflecting the wide range of potential coronavirus developments. “Greater progress on vaccinations may raise the prognosis, while new virus variants that avoid vaccines may lead to a sudden deterioration,” the group said in its report.

While advanced economies have been hit harder than developing countries by the 2008 global financial crisis, the IMF expects the opposite to happen in the pandemic. The group also said that young people, women and less skilled workers are more likely to lose their jobs because of the coronavirus.

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

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