IMF raises US GDP forecasts for 2017, 2018

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 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.

But this now faced but the US now faced "significant policy uncertainty." And both an aging work force and weak productivity growth would 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 US income taxes, notably by lowering corporate rates from 35 to 20 percent, which they hope to complete by January.

IMF Managing Director Christine Lagarde last week also urged the United States to proceed with a tax overhaul, saying it was "desperately needed" to boost growth.

But 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.

In addition to tax reforms, the IMF also said education remained a policy priority for the United States, including support for early childhood education as well as science, technology, engineering and mathematics programs.

Source: AFP