The International Monetary Fund (IMF) issued a warning on Tuesday, highlighting that the recent economic performance of the United States is partly due to its unsustainable fiscal practices. This poses significant risks for the global economy.
According to the latest World Economic Outlook by the IMF, the United States has been delivering an impressive and noteworthy performance, contributing significantly to global growth. However, the IMF also highlights that this exceptional performance is influenced by robust demand factors, including a fiscal stance that deviates from long-term fiscal sustainability.
The statement highlighted the immediate concerns regarding the disinflation process and the potential risks to fiscal and financial stability in the global economy. It acknowledged that the situation could lead to an increase in global funding costs, emphasizing the need for a resolution.
According to the International Monetary Fund (IMF), the U.S. economy is expected to experience a growth rate of 2.7 percent in 2024. This represents a significant upward revision of 0.6 percentage points from the previous projection made in January. Notably, this growth forecast surpasses the projections for other advanced economies.
According to a blog post by Pierre-Olivier Gourinchas, the IMF’s chief economist, the strong recent performance of the United States can be attributed to robust productivity and employment growth, as well as strong demand in an overheated economy.
He added that the Federal Reserve should adopt a cautious and gradual approach to easing.
Last spring, Congress made the decision to suspend the debt limit as part of a bipartisan agreement focused on controlling annual government funding through budget caps. At that time, the national debt was around $31.4 trillion, and it has continued to increase by trillions of dollars over the past year, as reported by the Treasury Department.
According to a report by the Congressional Budget Office earlier this year, the national deficit is expected to increase significantly in relation to gross domestic product (GDP) over the next 30 years. The report projects that by 2054, the deficit will reach 8.5 percent of GDP.
According to the nonpartisan budget scorekeeper, the projected growth is driven by various factors, including rising interest costs and large and sustained primary deficits. These primary deficits do not include net outlays for interest.
