US GDP will expand five to six percent over three years with the injection of $1.9 trillion in aid, according to the International Monetary Fund‘s preliminary estimates, and higher demand will help other countries sell more products to American consumers, IMF spokesman Gerry Rice told reporters.
“We see potentially significant positive spillovers in terms of global growth,” he said.
“Most countries should benefit from stronger US demand … so this will help global growth and recovery.”
However, he cautioned that policymakers should be on the alert for a sudden shift in borrowing rates.
That has been a growing concern in financial markets in recent weeks as accelerating Covid-19 vaccine rollouts offer hope of a rapid recovery, but also fears that growth could ignite an inflationary spiral that would force the Federal Reserve to raise interest rates sooner than expected.
Those fears have sent stock markets reeling, especially tech shares more likely to be hindered by rising lending rates, despite the Fed‘s repeated assurances that it will keep its foot on the gas to speed the recovery.
Rice said the Federal Reserve and other major central banks should continue to communicate “clearly, as they have been doing, about their assesment of the economy and their evolving views on asset purchases and interest rate policy to avoid any unwarranted tightening of financial market conditions.”
The IMF will update its forecasts on the US and global economy early next month at the start of its spring meeting.