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Biden stimulus plan could boost US output by 5% over 3 years: IMF

Gita Gopinath said the proposed package could add as much as 1.25 per cent to US growth in 2021, when the IMF projects the US economy will expand by 5.1 per cent after a 3.4 per cent contraction in 2020

twitter-logoReuters | January 27, 2021 | Updated 01:15 IST
Biden stimulus plan could boost US output by 5% over 3 years: IMF

Preliminary estimates show U.S. President Joe Biden's proposed $1.9 trillion economic stimulus package could boost U.S. economic output by 5% over the next three years, the chief economist of the International Monetary Fund said on Tuesday.

Gita Gopinath told a news conference the measures in the proposed package could add as much as 1.25% to U.S. growth in 2021, when the IMF projects the U.S. economy will expand by 5.1% after a 3.4% contraction in 2020.

Gopinath said the IMF had not calculated the impact of the proposed stimulus package on the global economy.

"We have (forecast) that this can raise output in the U.S. by 5% over three years," she said, cautioning that the estimates were still preliminary. The IMF predicts the U.S. economy will expand by just 2.5% in 2022.

U.S. Senate Majority Leader Chuck Schumer said late on Monday that he and his fellow Democrats may try to pass much of Biden's coronavirus relief bill using a process that would bypass a Republican filibuster and could allow it to pass with a majority vote.

Financial markets are betting the package could be smaller than the $1.9 trillion proposed by the Biden administration.

Gopinath, in a separate blog, noted the projected global recovery varied widely across countries, with large a difference in projected output losses relative to the pre-COVID-19 forecasts.

China, the world's second-largest economy, had returned to its pre-pandemic projected level in the fourth quarter of 2020, ahead of all large economies.

The United States, the world's largest economy, was projected to surpass its pre-COVID-19 levels this year, she said, well ahead of the euro area.

The faster recoveries in advanced economies were partly due to their more expansive policy support and quicker access to vaccines, but new waves of infections and problems with vaccinations still posed risks, she noted.

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