IMF reports on the US Economy
Washington, DC, June 27, 2024 — The IMF (International Monetary Fund) stated that although the US economy is performing well, the government should work on improving its fiscal position in the medium term by cutting spending and increasing revenue.
IMF Managing Director Kristalina Georgieva informed reporters that the world’s largest economy is projected to grow by 2.6 percent this year. This is a 0.1 percentage point decrease from the International Monetary Fund’s previous forecast for April. Nonetheless, the economy remains a key driver in global growth.
“The US is the only G20 economy whose GDP level now exceeds the pre-pandemic level. It is good for the US and the global economy. We expect the growth to be a healthy 2% this year on a four-quarter-over-four-quarter basis and sustain a similar pace over the medium term,” Georgieva said after publishing the results of the annual Article IV “health check” report on the US economy.
The IMF forecasts that inflation will reach the target in the upcoming year, slightly ahead of the US Federal Reserve’s projections.
Georgieva stated, “We anticipate that core PCE inflation will reach around 2.5% by the end of this year and return to the target by mid-2025. However, we acknowledge that there are significant upside risks to this trajectory. Considering these risks, we have agreed that the Fed should maintain policy rates at their current level until at least late 2024.”
Georgieva met with US Fed Chair Jerome Powell and US Treasury Secretary Janet Yellen to discuss the annual report’s findings. She told reporters that the Fund’s responsibility is to provide an honest assessment to all members but respect their political independence and national sovereignty to make economic decisions impacting their people.
She noted that US debt is rising, and it would be wise to tackle that borrowing now rather than wait until the next crisis or downturn.
“Now, during a period of strong economic growth, it is important to address and reverse this trend. The US has implemented significant fiscal legislation in ’21 and ’22. This legislation will have a long-term positive impact on reshaping the US economy. However, it needs to be complemented with measures to reduce the public debt relative to GDP through various policies, including increasing tax revenues, addressing structural imbalances and entitlement programs, and finding savings in non-entitlement spending,” Georgieva stated.
Reporters inquired whether the US would encounter difficulties in servicing its debt if other countries and investors started to steer clear of treasuries and become concerned about repayment. Georgieva pointed out that, following the pandemic, foreign investors flowed money into the US.
“So here we are in a country where, when you look at the debt servicing costs, they remain quite manageable. It is a country where the economy is performing extremely well, with the good performance being driven by productivity. Taking these conditions into account, we think that, looking ahead, the US can manage this debt. We see no signs of weakening interest in investing in the US economy,” she said.
- Featured Photo: Commemorative IMF-IOSCO mugs at the 1st IMF IOSCO (International Organization of Securities Commissions) Conference during the 2024 Spring Meetings of the World Bank Group and International Monetary Fund in Washington, DC, April 15, 2024. IMF Photo / Tom Brenner.
Source: IMF
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