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- The IMF expects the US economy to grow 5.1% in 2021, up from a previous forecast of 3.1%.
- It would be the strongest performance since 1984, with vaccines and stimulus driving recovery.
- But the IMF urged governments to keep spending and ensure all countries get vaccines.
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The US economy will recover at a much quicker pace than previously expected in 2021, as coronavirus vaccines and fiscal stimulus power the strongest growth since the 1980s, the International Monetary Fund predicted on Tuesday.
The IMF upgraded its forecast for US economic growth in 2021 to 5.1%, an entire 2 percentage points higher than its October prediction. That would be the strongest performance since 1984, according to World Bank data.
In an update to its world economic outlook, the international economic support organization said “a vaccine-powered strengthening of activity later in the year” would boost economies around the world. It increased its growth forecast for the world economy in 2021 by 0.3 percentage points to 5.5%.
It noted the US in particular would benefit from the fiscal stimulus package passed in December, which amounted to $900 billion. The IMF did not mention Joe Biden’s proposed $1.9 trillion stimulus package, although it encouraged countries to keep spending to support their economies until the virus has passed.
The IMF is far more positive about the US economy than its sister organization the World Bank, which earlier this month downgraded its forecast for 2021 growth to 3.5%. JPMorgan at the weekend said the consensus estimate for US growth in 2021 was 4.1%.
In its outlook, the IMF predicted the US economy would regain its pre-coronavirus size in 2021 and then grow 2.5% in 2022. The US economy is expected to have shrunk 3.4% in 2020.
China's economy is expected to grow 8.1% in 2021, 0.1 percentage point below the IMF's October prediction. The Chinese economy expanded 2.3% in 2020, making it the only major economy to grow last year.
IMF chief economist Gita Gopinath said in a blog accompanying the report: "China returned to its pre-pandemic projected level in the fourth quarter of 2020, ahead of all large economies. The United States is projected to surpass its pre-COVID levels this year, well ahead of the euro area."
The IMF downgraded its forecast for eurozone growth in 2021 by one percentage point. It is now expected to grow 4.2% this year after a 7.2% contraction in 2020.
Yet Gopinath stressed that there is "a great deal of uncertainty around this forecast". She added: "Greater success with vaccinations and therapeutics and additional policy support could improve outcomes, while slow vaccine rollout, virus mutations, and premature withdrawal of policy support can worsen outcomes."
Gopinath urged richer countries to help poorer countries access vaccines. Failure to do so would drive an even bigger wedge between rich and poor economies and prevent COVID from being eradicated, she said.
She said new virus strains - such as those in the UK and South Africa - "are a reminder that the pandemic is not over until it is over everywhere".