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IMF sees much stronger US growth, 2021 GDP +7.0%

·2-min read
International Monetary Fund (IMF) Managing Director Kristalina Georgieva (L) and US Treasury Secretary Janet Yellen meet to discuss the US economy

The IMF is bullish on the US economic recovery, predicting growth will hit 7 percent this year -- much stronger than previously forecast and "the fastest pace in a generation," the fund said in a report Thursday.

The International Monetary Fund's annual review of the US economy also boosted the 2022 GDP forecast by 1.4 percentage points over the April estimate to 4.9 percent.

But while the IMF mostly cheered President Joe Biden's policies to support the economy, the report flagged "significant concern" over the fact he has not pulled back on tariffs on goods like steel and aluminum imposed by his predecessor.

The US has seen a "remarkable recovery," the fund said, helped by "unprecedented" support from government spending and the Federal Reserve's "highly effective" stimulus measures.

The report notes the potential for growth to be even higher than forecast, but the outlook assumes $4.3 trillion in spending over the next decade from Biden's proposed American Jobs Plan (AJP) and American Families Plan (AFP).

Together those programs would fuel a 5 percent GDP increase for 2022-2024, the IMF estimated.

However, if Congress fails to approve the legislation or sharply curtails the size, that would reduce the growth boost.

The IMF said there is "solid empirical evidence ... of the societal payoffs" of such programs and said "a permanent increase in taxes on corporate profits and on high income households is warranted" to pay for them.

The Washington-based crisis lender reserved its harshest comments for Biden's trade policies, and said removing trade barriers would help support his worker-centric agenda.

"It is of significant concern, therefore, that many of the trade distortions introduced over the past four years remain in place," the fund said.

Biden has continued tariffs imposed by former president Donald Trump on imported steel and aluminum, washing machines, solar panels, "as well as a range of goods imported from China."

The IMF also questioned the tougher requirements set by the Trump administration for US products in government procurement which remain in place.

"These policies should be reconsidered. Trade restrictions and tariff increases should be rolled back and 'Buy American' provisions should be tightly circumscribed," the report said.