Lagarde warns US won't meet growth amid slow reforms

IMF chief Christine Lagarde warned Wednesday that the US will fall short of its ambitious economic growth goals unless it can accelerate promised policy changes, including tax reform.

The Trump administration has said it will push US growth to three percent annually -- a rate economists say is unrealistic, given the low US unemployment rate, among other factors.

The International Monetary Fund cut its growth forecast for the US economy this year back to 2.1 percent after reforms expected to boost the activity failed to materialize.

Asked on CBS This Morning if the US could reach its growth target, Lagarde said, "We think it is going to be very difficult, yes. Particularly if the reform pace is as slow as it is."

Lagarde noted that "there were very strong market expectations early in the calendar year after the elections that tax reform would take place promptly, that massive investment would be made in infrastructure."

However, she said, "none of that has materialized at all."

The IMF in January raised its US growth estimates on the expectation of fiscal stimulus and tax reform from the Trump administration, but reverted back to the previous calculations which project the economy will expand by 2.1 percent in 2017 and 2018, down from 2.3 percent and 2.5 percent, respectively.

She said the fund supports tax reform in principle and is prepared to "make recommendations to boost growth, create jobs, (and) restore middle-class income" in the US.

The fund will publish the revised growth forecasts in its World Economic Outlook in mid-October.

Asked about US President Donald Trump's harsh rhetoric threatening to "totally destroy" North Korea in a speech to the United Nations, Lagarde said the tone was not helpful.

"I think that those issues are so difficult, complicated, that they require a lot of good will, a lot of calm, and a lot of cooperation, and that's where I think that rhetoric does not necessarily help," she said.

Source: AFP