Latest
Recommended
Published: Wed, June 28, 2017
Economy | By Melissa Porter

IMF cuts US growth outlook, cites uncertainty around Trump policies

IMF cuts US growth outlook, cites uncertainty around Trump policies

The International Monetary Foundation (IMF) lowered its forecast for US economic growth for this year to 2.1%, down from the previous estimate of 2.3%.

The IMF said they are expecting the U.S. economy to grow by 2.1 percent this year, compared to an earlier projection of 2.3 percent made in April.

The IMF called for policies to raise the potential growth rate of the United States economy, including through investments in improved education and training programs, and policies to provide incentives to work, such as an earned-income tax credit.

Moreover, IMF leaders say it would be challenging to boost growth to 3% with the US job market already at full employment, along with a large share of baby boomers retiring and slow gains in productivity.

The IMF's annual review of the US economy says that history would suggest that the growth acceleration projected by the administration is "unlikely".

"The U.S.is effectively at full employment", the lender said. "For policy changes to be successful in achieving sustained, higher growth they would need to raise the U.S. potential growth path".

The fund however criticized the proposal put forth so far, with deep spending cuts "that, in the staff's view, would seem to place a disproportionate share of the adjustment burden on low- and middle-income households".

The US are now in the third-longest period of economic growth since 1850, given the full employment situation, but this hardly makes things any better, as disposable incomes are low, as is purchasing power, whilst the burden of household indebtedness is stunning. Growth will slip to 1.9% in 2019 and 1.8% in 2020, according to the fund's forecasts.

"On the other hand, spending reductions could be less ambitious and tax reforms could lower federal revenues, providing stimulus to the economy, raising near-term growth (and possibly potential growth), but with negative implications for debt sustainability and the current account imbalance".

Although, the president already has said that the broad principles of this plan would be simplifying taxes, rebuilding roads and bridges, and lowering government spending.

The IMF report also weighed in on the health-care debate consuming Washington, where Republican lawmakers are developing plans to repeal legislation brought in under former president Barack Obama.

The IMF forecast real GDP to grow at 3.9 percent in 2017, propelled by strong domestic demand.

"We are removing that fiscal stimulus because now we have in front of Congress a budget that assumes an important fiscal consolidation in the next few years", Alejandro Werner, head of the IMF's Western Hemisphere Department, said in a press conference.

But the country is having trouble adjusting to the challenges produced by technology and demographic changes, the International Monetary Fund said.

Like this: