Just one year after the onset of the coronavirus pandemic in the United States, the rapid pace of vaccinations and massive scale of fiscal stimulus spending will push the American economy to recover twice as fast as expected, the Organization for Economic Cooperation and Development said Tuesday.
The Paris-based policy organization expects U.S. GDP to grow 6.5% in 2021—more than double its December forecast of 3.2%.
That growth in the United States is expected to spill over to other countries, especially key U.S. trading partners like China, Mexico, and Canada, but not every country will rebound that quickly.
The organization noted that the recovery depends on the combination of effective vaccination programs and government spending.
“Stimulus without vaccinations won’t be as effective because consumers won’t go out doing normal things,” OECD chief economist Laurence Boone said, according to the New York Times.
Boone added: “It’s the combination of health and fiscal policy that matters.”
Slower vaccine progress or new vaccine-resistant variants of the coronavirus are “sizable” risks and have the potential to slow that recovery, the report says, and would result in larger job losses and more business failures.
5.5%. That’s how much growth the OECD is expecting across the globe in 2021. The global economy shrunk 3.4% last year.
Falling coronavirus cases and hospitalizations and President Biden’s $1.9 trillion stimulus bill prompted Morgan Stanley equity strategist Michael Wilson to declare that “the recession is effectively over” in a research note this weekend. Wilson noted, however, that some risks still remain, especially in equity markets.
President Biden’s $1.9 trillion American Rescue Plan is expected to face its final hurdle in Congress Wednesday, after which Biden will be able to sign it into law. If enacted, the legislation will authorize hundreds of billions of dollars in federal spending for vaccine distribution and virus testing, hospitals, state and local governments, schools and small businesses to help the United States recover from the ongoing coronavirus pandemic. It will be the sixth federal rescue package signed into law since the onset of the coronavirus pandemic in the United States last spring.