International Monetary Fund Revises Projection for US Economy to 7 Percent Growth in 2021

The International Monetary Fund's (IMF) economic outlook is on the up and up, especially for the United States, largely thanks to COVID-19 vaccinations helping sustain rebounds from the pandemic's financial toll, the Associated Press reported.

The IMF estimates 7 percent growth this year for the U.S., a steep climb back from last year's 3.5 percent decline and an upgrade from the 6.4 percent growth forecast released by the IMF in April.

Far-reaching spending plans from the Biden administration are expected to support growth this year and next year. The IMF said the U.S. economy will grow 4.9 percent in 2022 up from the 3.5 percent projected in April.

But poorer countries are expected to experience more downturn, according to the IMF, due to vaccination obstacles. Gita Gopinath, the IMF's chief economist, told reporters Tuesday that more needs to be done to supply vaccines to poorer nations that lag far behind wealthier nations.

"The recovery is not assured until the pandemic is beaten back globally," Gopinath said, asking wealthy nations to quickly fulfill their pledges to supply 1 billion does of the vaccine to developing nations.

For more reporting from the Associated Press, see below.

International Monetary Fund Director
The International Monetary Fund estimates 7 percent growth this year for the U.S., a steep climb back from last year's 3.5 percent decline. Above, IMF Managing Director Kristalina Georgieva speaks at the end of the Financing of African Economies Summit on May 18, 2021, in Paris. Ludovic Marin, Pool/AP, File

Overall, the IMF said Tuesday that it expects the global economy to expand 6 percent this year—a dramatic bounce-back from the 3.2 percent contraction in the pandemic year of 2020. The IMF's forecast, unchanged from its previous estimate in April, would mark the fastest calendar-year global growth in records dating to 1980.

Beneath the worldwide number, however, a gap between the vaccine haves and have-nots is widening. The IMF expects advanced economies to grow 5.6 percent this year, an upgrade from the 5.1 percent it forecast in April, fueled by the swift recovery of consumers and businesses. But it downgraded its 2021 forecast for emerging market and developing countries to 6.3 percent from its April forecast of 6.7 percent.

"Concerted, well-directed policy actions...can make the difference between a future where all economies experience durable recoveries or one where divergence is intensified, the poor get poorer and social unrest and geo-political tensions grow," Gopinath said.

Advanced economies, in which close to 40 percent of the population has been vaccinated, are largely reopening after last year's COVID-19 lockdowns. But in developing and emerging market countries, the vaccination rate is just 11 percent. Moreover, the governments of poorer countries cannot match the outpouring of government spending that rich countries have been using to propel their economic recoveries.

The 19 European countries that share the euro currency are forecast to grow 4.6 percent collectively this year, versus last year's 6.5 percent contraction. Japan, which endured a 4.7 percent drop in economic growth in 2020, is expected to expand 2.8 percent this year. But the 2021 forecast for Japan marks a downgrade from what the IMF expected in April, reflecting a resurgence of COVID-19 cases earlier this year.

In the developing world, the outlook for China, the world's second-largest economy after the United States, was marked down to 8.1 percent after the government scaled back spending and investment. The IMF also slashed its growth forecast for India to 9.5 percent from 12.5 percent three months ago after the country was overwhelmed by COVID cases.

Despite the brighter outlook for major economies, the outlook across the world has been clouded by uncertainty over the delta variant of the coronavirus and the uneven progress of vaccination campaigns.

In the update to its World Economic Outlook, the IMF expressed concern that any major resurgence of inflation would pressure the world's central banks into raising interest rates and thereby threatening the global recovery. Still, it expects inflation to return to pre-pandemic levels in most countries next year.

Indonesia COVID Burials
"The recovery is not assured until the pandemic is beaten back globally," IMF chief economist Gita Gopinath said. Above, funeral workers prepare to bury COVID-19 victims who were brought by ambulance directly from hospitals, at the Pedurenan public cemetery in Bekasi, West Java, Indonesia, on July 23, 2021. REZAS / AFP/Getty Images