Daily Management Review

In 2021 The US Economy To Grow Fastest Since 1984


In 2021 The US Economy To Grow Fastest Since 1984
According to the International Monetary Fund (IMF), the economy of the United States as well as that of the world will be boosted by the US President Joe Biden's $1.9 trillion Covid-19 stimulus package.
The IMF however also warned that the Covid-19 pandemic is still lingering in many countries and they risk being left behind in the revival.
The IMF said that the total size of the US economy by the end of this year will be greater than its pre-pandemic size with a growth of 6.4 per cent, as the international financial body raised its forecast for the economy by 1.3 per cent compared to its previous forecast in January.
The growth in US economy will in turn help the global economy to grow by 6 per cent for 2021, which is also an upgrade by IMF by 0.5 percentage points from its previous forecast.
The estimates are broadly in line with Wall Street's expectations.
"At $1.9 trillion, the Biden administration's new fiscal package is expected to deliver a strong boost to growth in the United States in 2021 and provide sizable positive spillovers to trading partners," the IMF said in a report. Trillions into the global economy have also been put in during the pandemic by other governments and central banks around the world.
The "unprecedented policy response" to the pandemic means the "recession is likely to leave smaller scars than the 2008 global financial crisis", the IMF noted.
The IMF estimated that there was a 3.3 per cent drop in global output last year with the US economy shrinking by 3.5 per cent.
Signals of the fast recovery of the US economy are clearly available. In March, the growth in employment in the country was the highest since August with addition of 916,000 jobs. There is also growth in the US manufacturing sector and the ISM Manufacturing Index recently posted its best reading since 1983.
This year, the US economy will witness its fastest growth since 1984 under President Ronald Reagan because of the coronavirus vaccine rollout and massive government stimulus, estimated the IMF. But there are many countries that will be able to recover all the output lost during the pandemic only in 2022 or 2023.
According to the IMF, there will be a slowdown of global output nest year at 4.4 per cent.
"Multispeed recoveries are under way in all regions and across income groups, linked to stark differences in the pace of vaccine rollout, the extent of economic policy support, and structural factors such as reliance on tourism," said Gita Gopinath, director of research at the IMF. "The divergent recovery paths are likely to create significantly wider gaps in living standards between developing countries and others."
The IMF noted that the US growth will be outpaced by some countries in Asia. According to the global body, there will be much stronger growth in the Chinese economy – the only major economy to register growth in 2020, than the 6 per cent that the country’s government has forecast for 2021. And there is expected to be a 12.5 per cent growth in the Indian economy in the fiscal year of 2021-22 ending in March 2022.