IMF Sees U.S. Potential Growth at Half the Pace of White House Estimates

Date : 06/14/2018 @ 1:32PM
Source : Dow Jones News

IMF Sees U.S. Potential Growth at Half the Pace of White House Estimates

By Josh Zumbrun 

The International Monetary Fund warned that the economic boost from last year's tax cuts in the U.S. will fade in 2019 and 2020, and the U.S. economy will then slow considerably.

The IMF's forecasts, released Thursday in Washington as part of its annual review of the U.S. economy, provide a sharp contrast to the economic outlook of the White House, which sees growth accelerating to a sustained 3% annual growth rate within five years. The IMF, by contrast, sees the U.S. growing at about half that pace once the tax cuts' impact fades.

The IMF shares the administration's view that the tax cuts made largely beneficial changes to the U.S. economy, especially by reducing tax code complexity, lowering marginal tax rates, and creating incentives for investment. They share a forecast of a near-term economic boost.

Where the IMF's forecast differs is over the effects of the massive fiscal deficits that the Treasury is poised to incur in coming years, as revenue drops while spending also increases.

The combination of massive deficits and very low unemployment is "quite rare in the U.S. context and has not been seen since the Johnson administration," the IMF said. While it will boost the economy this year and next, "it also increases the range and size of future risks, both for the U.S. and for the global economy."

The growth will drop as low as 1.4% in 2023, the IMF said, a more pessimistic outlook than that of the Federal Reserve, which released forecasts Wednesday calling for 1.8% growth in the longer-run, and the Congressional Budget Office, which foresees 1.6% growth by 2023.

Write to Josh Zumbrun at Josh.Zumbrun@wsj.com

 

(END) Dow Jones Newswires

June 14, 2018 13:17 ET (17:17 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.


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