US GDP to grow by over 6% in 2021


The US GDP is on track to grow by more than 6 per cent this year, owing in part to its fiscal policy, according to a report.

The revelation was made in the Peterson Institute for International Economics (PIIE)’s semi-annual Global Economic Prospects released on Thursday, Xinhua news agency reported.

“Of the large advanced economies, the US will expand the fastest in 2021, owing in part to its aggressive fiscal policy response,” said PIIE Senior Fellow Karen Dynan, who is also former chief economist at the Treasury Department.

Europe is lagging because of a smaller fiscal response and its struggles to contain the virus, while Britain will see some continued drag from the Brexit transition, Dynan said.

The PIIE forecast Euro Area and the UK to grow by 4.4 per cent and 3.8 per cent this year, respectively.

Among large emerging economies, China leads the recovery, after “containing the virus effectively” in 2020 and suffering only indirect effects from recessions elsewhere, she noted.

The PIIE forecast Chinese economy to grow by 8.5 per cent this year.

Global economy, meanwhile, is expected to expand by 5.6 per cent in 2021, followed by 4.4 per cent growth in 2022, according to the outlook.

The Washington D.C.-based think tank forecasts core US inflation at 2.2 per cent by the end of 2022, and projects unemployment to decline to 5.0 per cent by year-end and 4.4 per cent by the end of 2022, still higher than pre-pandemic level of 3.5 per cent.

At a virtual event releasing the outlook, PIIE President Adam S. Posen said that US headline Consumer Price Index (CPI) inflation could average 3.25 per cent or higher over the next 18 months, much higher than current Federal Reserve and market forecasts.