Real GDP is projected to grow by 6.9% in 2021 and 3.6% in 2022. Substantial additional fiscal stimulus and a rapid vaccination campaign have given a boost to the economic recovery. The unemployment rate will continue to fall, even as more discouraged workers are enticed back into the labour market. Rising wages, combined with government transfers and accumulated household savings, will propel consumption. Core price inflation will rise, but should remain under control.
Fiscal policy will exert a strong expansionary influence in 2021 before subtracting from growth in 2022 as time-limited stimulus measures expire. Monetary policy is set to remain highly accommodative, although long-term bond yields will rise as the Federal Reserve begins to taper asset purchases once the employment recovery is firmly entrenched. Structural reforms that sustain output growth should be prioritised once the impact from temporary stimulus has waned. Upgrading access to community colleges, apprenticeship, life-long learning and job placement services would help vulnerable groups. Infrastructure investment plans should seek to reduce high levels of carbon emissions.