Washington (EFE).- The International Monetary Fund (IMF) lowered this Thursday by just one tenth, to 2.6%, its growth forecast for this year for the US economy, which has proven to be “robust.” , dynamic and capable of adapting”, while recognizing that there is room to gradually lower interest rates.
“Economic activity and employment continue to exceed expectations, relative to the 2023 Article IV, and the decline in inflation has been less costly than feared,” the Fund indicates in its country report for the United States.
The IMF said it should “carefully consider” raising indirect taxes, progressively increasing income taxes, even on households earning less than $400,000, and eliminating tax benefits and social programs to reduce the deficit.
“Now, when the economy is strong, is the time to address these needs and reverse the trend (in the deficit),” said IMF managing director Kristalina Georgieva at a press conference.
US surpasses pre-pandemic levels
“The United States is the only G20 economy whose level of Gross Domestic Product already exceeds the levels prior to the (covid-19) pandemic,” Georgieva indicated.
The IMF believes that the Federal Reserve should wait until at least “the end of 2024” to lower its interest rates for the first time, currently at their highest level in two decades, but there is “significant room to maneuver” towards price stability, given that the effect of restrictive monetary policy has not had a serious effect on employment.
Regarding risks, the IMF assured that the high level of fiscal deficit and the ratio between GDP and debt is high, while trade restrictions and banking risks should keep the US government alert.
The IMF expects the economy to maintain a GDP growth rate of around 2% through 2029, with unemployment stable at around 4% and inflation correcting below 2% next year.
“The US debt is sustainable, but the level has risen and the deficit has risen. What we are saying is that if they reduce it now they will have a much more solid path in the future,” Georgieva explained.
IMF: there is a period of geopolitical uncertainty
Georgieva recalled that the world is going through a period of geopolitical uncertainty and although the US has “enough room to maneuver its monetary policy” and inflation “shows clear evidence of returning to the sustainable level of 20%”, risks appear.
The head of the IMF also criticized the US protectionist measures to protect or develop strategic sectors, especially against China, although she said that the “negative consequences of globalization”, in general, with the loss of jobs and its effect on the poorest.
However, he noted that the US economy has traditionally been open to the world and has benefited from low trade restrictions.
Georgieva said that “we need to address these issues through more dialogue with trading partners, as we believe that this will be less costly for the US and the global economy, rather than resorting to tariffs that may lead to retaliation from other trading partners.”
