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Business & Finance

US stimulus offers 'significant' boost to global economy: IMF

  • However, he cautioned that with low interest rates, policymakers worldwide should be on the alert for a sudden shift in borrowing costs.
12 Mar 2021

WASHINGTON: US President Joe Biden's stimulus program is being hailed as both boosting domestic growth and spurring the global recovery, but the IMF warned that policymakers will need to be alert to risks posed by the massive spending as well as low interest rates.

The package, which Biden signed into law on Thursday, will inject $1.9 trillion in aid into the pandemic-damaged economy by funding small businesses, extending unemployment benefits that were due to expire in days, and sending direct payments of as much as $1,400 to many Americans starting this month.

That spending will expand US GDP by five to six percent over three years, according to the IMF's preliminary estimates.

And higher demand will help other countries sell more products to American consumers, the fund's spokesman Gerry Rice told reporters Thursday.

"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 with low interest rates, policymakers worldwide should be on the alert for a sudden shift in borrowing costs.

That has been a growing concern for financial markets in recent weeks as accelerating Covid-19 vaccine rollouts offer hope of a rapid recovery, but also sparked fears that growth could ignite an inflationary spiral that would force the Federal Reserve to raise interest rates sooner than expected.

The concerns have sent stock markets reeling in recent sessions, especially tech shares, which are more likely to be hindered by rising lending rates.