The U.S. economy is recovering faster than anyone thought. That assessment is not from the Trump administration but from the International Monetary Fund (IMF). The IMF has issued a “significant upgrade” to American economic forecasts for 2020, driven by faster-than-expected recovery from the COVID-19 pandemic.
The news is important because the U.S., as the world’s largest and most dynamic economy, is the economic engine for the entire world.
“We’re seeing a fairly quick recovery, which is why we have the upgrades,” Gita Gopinath, IMF’s chief economist, said on Oct. 13 during a press conference.
“In the second quarter, the recovery came about sooner than we expected. And then continuing into quarter three, the indicators have been stronger,” she said.
Overall U.S. economic growth for the full year will still be in negative territory. But the economy is now projected to contract by 4.3 percent in 2020, less sharply than an 8 percent drop predicted by the IMF in June.
Gopinath said the U.S. personal disposal income held up in the first half of the year, thanks to unprecedented fiscal stimulus from the Trump administration and the central bank support.
Because of state-imposed shutdowns, the U.S. gross domestic product (GDP) contracted at an annual rate of 31.4 percent in the second. Since then, the economy has shown a V-shaped recovery, with some economists now predicting nearly 35 percent growth in the third quarter wiping out most of the loss.
Some of the predictions made in June pertaining to mobility and consumer activity data haven’t materialized in the third quarter, according to Gian Maria Milesi-Ferretti, deputy director at IMF’s research department.
“At the time, we were thinking that the increase in the number of infections could imply some decline in mobility and activity, but that has really not materialized during the third quarter. And that has been one of the factors explaining our upward revision,” he said during the press conference.
“Further increase in growth in the U.S. has positive spillovers to the rest of the world,” Gopinath said.
Support provided by the Federal Reserve, she added, helped stabilize international financial markets and gave more breathing space for emerging markets.
The IMF released its new world economic outlook report as part of this week’s annual meetings of the IMF and World Bank. The world economy is projected to rebound by 5.2 percent next year.
“Close to 90 million people are expected to fall into extreme deprivation this year,” the IMF report stated. “These are difficult times, yet there are some reasons to be hopeful.”
The IMF isn’t the only body that has praised the U.S. recovery and the Trump administration’s response. While not agreeing with all aspects of Donald Trump’s policies, world leaders this summer have praised the president and based their own decisions on his leadership of the nation through he pandemic.
One of those is World Health Organization Director-General Tedros Adhanom Ghebreyesus singled out President Donald Trump, whom he worked with closely in the Spring, for doing a “great job” in leveraging public and private sector resources to fight the pandemic.