IMF Trims Economic Growth Forecast for US

The International Monetary Fund said Tuesday that it expects the global economy to grow 3.2% this year and 3.3% next year, the same as it estimated earlier this year. But its latest economic projections include slightly lower estimates for U.S. growth, as well as warnings about the persistence of inflation and debt around the world.

In April, the IMF projected a 2.7% growth rate for the U.S. in 2024, but it has nudged that estimate down to 2.6%. “The United States shows increasing signs of cooling, especially in the labor market, after a strong 2023,” IMF economist Pierre-Olivier Gourinchas said in a blog post accompanying the new projections.

The IMF also said that while it still expects the global inflation rate to ease from 6.7% last year to 5.9% in 2024, upward pressure in the prices of services remains a problem — one that could threaten the overall outlook. “Unless goods inflation declines further, rising services prices and wages may keep overall inflation higher than desired,” Gourinchas wrote. “Even absent further shocks, this is a significant risk to the soft-landing scenario.”

Public finances are another source of concern, the IMF said, as countries around the world have done little to rebuild the “fiscal buffers” they would need to face another shock such as the pandemic. “Projected fiscal consolidations are largely insufficient in too many countries,” Gourinchas said. “It is concerning that a country like the United States, at full employment, maintains a fiscal stance that pushes its debt-to-GDP ratio steadily higher, with risks to both the domestic and global economy. The increasing US reliance on short-term funding is also worrisome.”