International Monetary Fund cuts USA growth forecasts, citing lack of Trump fiscal details

Javier Howell
June 28, 2017

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

International Monetary Fund officials welcomed many of Trump's broad principles: Simplify taxes, rebuild roads and bridges, and lower government spending.

That would be an improvement over last year's lackluster 1.6 percent growth rate but down from the IMF's April forecast for growth this year of 2.3 percent.

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

However, US officials participating in the discussions agreed with the International Monetary Fund view that uneven growth has created "important social problems" and shared the objective of trying to reverse these trends to achieve a "more even distribution of the gains", Werner said.

Democrats are simply opposed to any Trump initiative whatsoever because the lack of progress on Trump's reforms, they assume, brightens their electoral prospects from 2018 and 2020.

Nevertheless, it summed up the situation by saying that "the U.S. economic model is not working as well as it could in generating broadly shared income growth". "Most critically, relative to historical performance, post-crisis growth has been too low and too unequal".

The IMF's forecast is that annual GDP growth of 2.1 percent this year and 2.1 percent next year would slow to 1.9 percent in 2019 and 1.8 percent in 2020. It is impossible, however, to comprehensively calculate the real effect of the Trump-proposed measures at this point, the Fund admitted, but any such assessments no the IMF's part are quite cautious.

Even while the United States is seeing its third longest expansion since 1850 and is at full employment, the world's largest economy is facing rising public debt and an overvalued currency - which tends to hinder exports.

The world's biggest economy will probably have a hard time hitting Mr. Trump's target of 3 percent annual growth as it's faced with problems ranging from an aging population to low productivity growth, and with a labor market already back at full employment, the fund said in its annual assessment of the USA economy released Tuesday.

"A comprehensive policy package is needed", the report said. Jobs don't help any longer.

The IMF, in its annual review of the American economy, questioned the White House's plan to accelerate output and said it was skeptical the administration would be able rev up the world's largest growth engine to a sustained 3% annual rate. The IMF also suggests increased petrol taxes and greenhouse emissions, a new consumption tax on the federal level and keeping Obamacare in place.

On the other hand, the president has made promises to promote USA economic growth.

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