PIMCO ups US economic growth forecast on tax deal

NEW YORK, Dec 9 (Reuters)- Pacific Investment Management Co, which runs the world's biggest bond fund, is revising its growth forecast for the United States next year after President Barack Obama's tax-cut compromise, Chief Executive Mohamed El-Erian told Reuters late Thursday.

PIMCO sees the economy growing 3 percent to 3.5 percent in the fourth quarter of 2011 from the same period of this year. That compares with its previous estimate for 2 percent to 2.5 percent growth.

"We revised this week our outlook for U.S. growth in 2011 taking into account Monday's announcement on additional fiscal stimulus measures," El-Erian said in an interview. El-Erian also shares the co-chief investment title with Bill Gross, who runs the $256 billion PIMCO Total Return Fund.

"It is far from certain at this point that 2011's higher growth projection will translate into a significant improvement in the growth outlook for the period beyond next year," he added.

Obama on Monday unveiled a compromise deal to extend all Bush-era tax cuts for two years, giving ground to emboldened Republicans who won big in last month's congressional elections.

Many economists also raised their U.S. gross domestic product forecasts after the tax deal struck by Obama, which included a surprise reduction in payroll taxes for 2011.

Even before the tax-cut compromise, investment bank Goldman Sachs (GS.N) raised its 2011 U.S. gross domestic product forecast to 2.7 percent from 2 percent. On Tuesday, Goldman said the tax package could add 0.5 to 1.0 percentage points of growth on top of that.

El-Erian said: "Such a multiyear improvement would likely also require structural measures aimed at improving America's global competitiveness and a credible medium-term fiscal consolidation program."

He warned: "It's important to ask whether the extraordinary fiscal and monetary stimulus measures, by themselves, will also have a meaningful impact on growth beyond 2011." (Reporting by Jennifer Ablan; Editing by Steve Orlofsky)