NEW YORK (BLOOMBERG) – Goldman Sachs Group economists raised their growth forecasts for the US this year and beyond after President-elect Joe Biden unveiled a sweeping revival plan calling for US$1.9 trillion (S$2.5 trillion) in spending.

In a weekend report to clients, economists led by Jan Hatzius predicted the economy would expand 6.6 per cent this year, faster than the 6.4 per cent previously expected. The unemployment rate for the end of 2021 is now seen at 4.5 per cent, down from the prior estimate of 4.8 per cent.

The upgrade is fueled by expectation that Mr Biden, aided by a Democratic-controlled Congress, will deliver ample amounts of state fiscal aid, education and public health spending, as well as unemployment insurance benefits, to counter harm from a pandemic now in its most devastating stage to date. Goldman’s estimate for 2021 economic growth is the second highest in a Bloomberg survey of 84 economists; the median estimate is 4.1 per cent.

While the economists don’t expect all parts of Mr Biden’s proposal to pass, they predict that an additional US$1,400 in individual stimulus payments will cause a “large spike” in disposable income in the first three months. On Thursday, Goldman raised its estimate for the amount of stimulus Mr Biden will win to US$1.1 trillion, up from a previous forecast of US$750 billion.

“We now forecast nominal disposable income will grow in 2021 by +4.5 per cent” versus the previous estimate of 3.8 per cent, according to Goldman’s latest note.

Goldman expects gross domestic product growth of 4.3 per cent in 2022 and 1.6 per cent the following year. “We have not made any changes to our Fed forecast, and continue to expect that tapering will not begin until 2022 and that liftoff will occur in the second half of 2024,” the economists said, referring to their previous forecast on when the Federal Reserve will raise interest rates.

Brian Deese, incoming director of Mr Biden’s National Economic Council, warned Sunday the US economy is “spiraling downward” and called for swift action.