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October 22, 2019

IMF lowered its forecast for the US economy growth


IMFThe International Monetary Fund (IMF) has lowered its forecast for the US economic growth for 2017 and 2018, and has criticized the economic downturn after the Great Recession. The IMF lowered its forecast for the growth of the US economy to 2.1% in 2017 and 2018. The fund no longer expects President Donald Trump’s tax cuts and fiscal spending to boost gross domestic product (GDP).

But in April, as part of its global report, the IMF relied on growth of 2.3% in 2017 and 2.5% in 2018 in the US, partly on the basis of the expected tax cuts and new federal spending. But given the lack of details of the US government’s “still-evolving political plans”, the IMF has decided to remove the incentives allowed from its assessment.

In its statement after the review of the US economic policy (end of the so-called consultation under Article 4b), the institution stated that it is unlikely that the administration’s desire for an annual growth of over 3% during a long period will become a fact, as the labor market is already at a level corresponding to full employment. The longer-term prospects for the United States are also not better, and even worse – 1.9% and 1.8% economic growth for 2019 and 2020 respectively.

“The US economy is not working as well as it can”, says the report of IMF. “Compared with the historical performance, the growth (in previous years) was too low and too uneven”, adds the statement.

According to the IMF, USA continues to suffer from rising indebtedness, overvalued currency by 10-20% and constantly worsening international investment positions. The external position is a bit weaker than the medium-term foundations and should lead to a prudent policy. The current account deficit is expected to reach 3% of gross domestic product in the medium term, IMF experts analyze.

One reason for the decline in the growth forecast is the fact that during the consultations, the IMF was left with the impression that the administration’s plans to solve the above problems are still very vague. Against this background of uncertainty, the IMF proceeds in its baseline scenario with unchanged political conditions.


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