US Economy: IMF predicts accelerating growth but obstacles loom

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Europe

02:53

The International Monetary Fund says it expects the United States to next year enter into the longest period of sustained growth in its recorded history. That's the good news. But, there's always a "but" with the IMF. From Washington, Daniel Ryntjes reports.

Growth in the United States continues, and is even accelerating, according to the latest International Monetary Fund forecasts. It'll expand 2.9% this year and 2.7% in 2019.

The U.S. Congress and the Trump administration have supported policies designed to stimulate an already-strong economy by cutting taxes and raising spending.

CHRISTINE LAGARDE IMF MANAGING DIRECTOR "We believe that in the next few years the U.S. economy will be entering its longest expansion in recorded history. The Tax Cuts and Jobs Act and the approved increase in spending are providing a significant boost in the economy."

But that intensifies concerns that public debt levels are climbing to unsustainable levels. The IMF expects them to reach above 90% of GDP by 2024.

The Fund's economists recommend ways the U.S. could raise taxes to lower its debt burden and invest for longer-term benefits. That would include spending on infrastructure and crafting policies to reduce inequality by helping lower-wage workers compete for skilled jobs.

The IMF says the Trump administration's 'pro-cyclical' stimulus may also carry other risks. With unemployment low and businesses and consumers investing and spending, the prices for goods and services could rise faster than expected.

CHRISTINE LAGARDE IMF MANAGING DIRECTOR "The planned increase in the federal deficit at this stage of the cycle would trigger a faster-than-expected rise in inflation. That would be accompanied by a more rapid rise in interest rates that could increase financial market volatility, both in the U.S. and abroad."

There are already signs of that happening. Argentina for example has recently come to the IMF seeking support.

Emerging and developing countries can struggle to service high levels of debts when the dollar strengthens. This can also lead to the withdrawal of international private investment capital.

Fresh from witnessing the dramatic early exit of President Donald Trump from the G7 summit in Canada, the IMF Managing Director is urging the Trump administration to resolve trade disputes.

DANIEL RYNTJES WASHINGTON "Christine Lagarde is concerned that a protracted conflict over tariffs will undermine business confidence across the world. Daniel Ryntjes, CGTN, Washington."