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IMF cuts US growth outlook amid absent policies

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Washington: The International Monetary Fund cut its growth forecasts for the US economy to 2.1 per cent for both 2017 and 2018, dropping its assumption that President Donald Trump’s tax cut and fiscal spending plans would boost growth.


The IMF in January raised the estimates on the expectation of fiscal stimulus from the Trump administration, but have reverted back to the previous calculations — which project the economy will expand by 2.1 per cent in 2017 and 2018, down from 2.3 per cent and 2.5 per cent, respectively.


During the annual discussions with US officials on the outlook for the economy, “it became evident that many details about these plans are still undecided,” the IMF said of the administration’s planned reforms in the so-called Article IV report.


The fund’s economists previously had factored in spending stimulus equivalent to two per cent of the economy from 2017 to 2019, but that was removed.


The IMF warned that “significant policy uncertainties imply larger-than-usual” risks to the US forecasts on either side, since spending cuts could lower growth, while tax cuts could provide stimulus and expand the economy. 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 fund welcomed the administration’s objectives to bring down debt and adjust spending policies “to finance priorities such as infrastructure.” However, the discussions “revealed differences on a range of policies and left open questions as to whether the administration’s proposed policy strategies are best suited to achieve their intended purpose.” — AFP


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