IMF raises US growth forecasts for 2017, 2018

Agence France-Presse

Posted at Oct 11 2017 08:16 AM

New cars are shown for sale at a Chevrolet dealership in National City, California, US, June 30, 2017. Mike Blake, Reuters/File Photo

WASHINGTON - The IMF on Tuesday raised its 2017 economic forecast for the United States but said the coming years would likely see sluggish gains in the absence of more growth-oriented policy from Washington.

Citing strong market confidence in the world's largest economy, the International Monetary Fund said US GDP was now expected to grow by 2.2 percent this year, a tenth of a percentage point higher than a forecast published in July.

The US economy will also likely expand by an even faster 2.3 percent in 2018, up two tenths from July's estimate, according to the global crisis lender.

The rosier figures, released with the latest update to the IMF's semiannual World Economic Outlook, were lifted in part by a recovery in the US energy sector and growing consumer spending and business investments earlier in the year. 

But the IMF said that -- absent reforms and stimulus and with a Republican economic agenda suffering lengthy delays in Congress -- the US was unlikely to sustain the faster pace of growth.

"Over a longer horizon, US growth is expected to moderate," the report said, noting that the current estimates assumed no change in US fiscal policies.

Higher IMF growth estimates for the US published in April -- with growth forecast to hit 2.5 percent by 2018 -- assumed Republican leaders in Washington would overhaul the US tax code.

And both an aging work force and weak productivity growth will likely hold US economic growth potential around 1.8 percent, according to the report.

President Donald Trump took office at the start of the year, vowing to create 25 million jobs over a decade and return the United States to three percent annual growth by slashing taxes, regulations and trade deficits while investing in infrastructure.

The White House and congressional leaders last month unveiled proposals for deep cuts to US income taxes, notably by lowering corporate rates from 35 to 20 percent, which they hope to complete by January.

"At this point, I think we're in a wait-and-see mode," IMF Economic Counsellor Maurice Obstfeld told reporters, adding it was unclear what tax exemptions the Republican proposal might contain or whether it would enlarge the US budget deficit.

"We're really not sure based on what we've seen what degree of stimulus the ultimate tax plan that is agreed in the US would be."

Observers say the chances for passage in a narrowly divided legislature, with which Trump frequently feuds, are balanced on a knife's edge. Critics have also denounced the measure as a giveaway to the rich.

"I think we're increasingly aware that tax systems have to be cognizant of how the affect inequality and there's a need in a number of countries to be especially attuned to the needs of the middle class," Obstfeld said.

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