IMF says U.S. economy is growing at its fastest pace since 1984

IMF says U.S. economy is growing at its fastest pace since 1984

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The US economy will surpass its pre-pandemic size, with growth reaching 6.4% this year, the IMF said, 1.3 percentage points above the group’s forecast in January. The recovery will help the global economy expand by 6% in 2021, an increase of 0.5 percentage points from the IMF’s previous outlook. The estimates are broadly in line with Wall Street expectations.
“At $ 1.9 trillion, the new fiscal package from the Biden government is expected to give a strong boost to growth in the United States in 2021 and provide considerable positive repercussions for trading partners,” said the IMF in a report. Other governments and central banks around the world have also injected trillions into the global economy.

The IMF said the “unprecedented political response” to the pandemic means that “the recession is likely to leave smaller scars than the 2008 global financial crisis”. The group estimates that global production fell 3.3% in 2020, while the U.S. economy shrank 3.5%.

There are already signs that the US recovery is picking up speed. American employers created 916,000 jobs in March, the biggest gain since August. The U.S. manufacturing sector is also moving forward, with the ISM Manufacturing Index recently reporting its best reading since 1983.

The IMF expects the launch of the coronavirus vaccine and the government’s enormous 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 is expected to slow to 4.4% next year, according to the IMF.

“Multispeed recoveries are underway in all regions and income groups, linked to marked differences in the pace of vaccine implantation, the extent of support for economic policy and structural factors such as dependence on tourism,” said Gita Gopinath, director of IMF research. “Divergent recovery paths are likely to create significantly greater gaps in living standards between developing countries and others.”

The updated US forecast means that the world’s largest economy is on track to grow faster than many other developed nations this year. The IMF expects 4.4% growth in the 19 countries that use the euro, while Europe faces another wave of coronavirus that has forced Germany, France and Italy to tighten restrictions. Production is expected to grow 3.3% in Japan.

But some nations in Asia will still overtake the United States. The IMF expects China, which was the only major economy to avoid a recession last year, to grow 8.4% in 2021 – much stronger than the country’s official forecast of more than 6%. Indian production will increase 12.5% ​​in the fiscal year through March 2022.

The IMF credited the continued government stimulus and the launch of vaccines for the strongest growth projections. He said consumer prices can be volatile, but it does not expect high levels of inflation to take root due to weak wage growth and unemployment.

Still, the IMF warned that a “high degree of uncertainty surrounds” its projections, reflecting the wide range of potential coronavirus developments. “Further progress with vaccination may raise the forecast, while new variants of the virus that evade vaccines may lead to a sharp decline,” the group said in its report.

Although advanced economies have been more affected than developing nations by the consequences of 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 less qualified workers are more likely to lose their jobs due to the coronavirus.

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

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