US GDP growth to hit 7% this year : IMF
Washington, US – The IMF is bullish on the US economic recovery, predicting growth will hit 7 per cent this year – much stronger than previously forecast and 'the fastest pace in a generation,' the Fund said in a report.
The cheery analysis is a boon to President Joe Biden's administration and comes amid data showing an improving job market.
The International Monetary Fund's annual review of the US economy put growth at its fastest rate since 1984, and also boosted the 2022 GDP forecast to 4.9 per cent, 1.4 percentage points higher than the April estimate. But while the IMF mostly cheered Biden's policies to support the economy, the report flagged 'significant concern' over the fact he has not pulled back on tariffs on goods like steel and aluminum imposed by his predecessor.
The United States has seen a 'remarkable recovery,' the Fund said, helped by 'unprecedented' support from government spending and the Federal Reserve's 'highly effective' stimulus measures.
The report notes the potential for growth to be even higher than forecast, but the outlook assumes US$4.3tn in spending over the next decade from Biden's proposed American Jobs Plan (AJP) and American Families Plan (AFP).Together those programs would fuel a more than 5 per cent GDP increase for 2022-2024, the IMF estimated.
"Rather than just offering a short-term boost to demand that then fades away, the Jobs and Families Plans are expected to produce a lasting improvement in income and living standards for many years to come," IMF managing director Kristalina Georgieva told reporters.
However, if Congress fails to approve the legislation or sharply curtails the size, that would reduce the growth boost.
Asked about that, Georgieva noted the bipartisan agreement on the physical infrastructure parts of the proposal.
"Size is not everything. What matters more than sizes, what is the composition of the packages," she said.
The IMF report said there is 'solid empirical evidence ... of the societal payoffs' of programs like those Biden has proposed, which include access to childcare to allow women to enter and remain in the workforce, and access to higher education and training to ensure younger workers have necessary skills for the jobs available.
A permanent increase in taxes on corporate profits and on high income households is warranted to pay for the proposals, the IMF said.
'Significant concern'
The Washington-based crisis lender reserved its harshest comments for Biden's trade policies, and said removing trade barriers would help support his worker-centric agenda.
"It is of significant concern ... that many of the trade distortions introduced over the past four years remain in place," the report said.
Biden has continued tariffs imposed by former president Donald Trump on imported steel and aluminum, washing machines, solar panels, 'as well as a range of goods imported from China.'
The IMF also questioned the tougher requirements set by the Trump administration for US products in government procurement which remain in place.