London – While investors were waiting the speech of Federal Reserve Chair Janet Yellen late on Tuesday, to know whether the Federal Reserve is still supporting its optimistic expectations on the future of the US economy, the International Monetary Fund (IMF) announced thatit has cut its forecasts for the US growth to 2.1 percent in 2017 and 2018.
This is the first-of-its-kind drop since the election of Donald Trump because of his ambiguous plan to boost the economy and enhance the tax cut and fiscal spending plan of the US administration.
The IMF, after a review of US economic policy, said the Trump administration was unlikely to achieve its goal of annual GDP growth of 3 percent over a sustained period, partly because the labor market is at a level consistent with full employment.
The IMF in April had forecast US growth of 2.3 percent for 2017 and 2.5 percent for 2018, based partly on gains from expected tax cuts and new federal spending. But given the lack of details on the US administration’s “still evolving policy plans” the IMF said it had decided to remove the assumed stimulus from its forecasts.
The IMF said the Trump administration’s latest budget plans would place a disproportionate share of spending cuts on to low- and middle-income households, adding: “This would appear counter to the budget’s goals of promoting safety and prosperity for all Americans.”
The Fund added that the new forecasts significantly reflect the ambiguity of economic procedures which will be adopted within the coming months.
Days prior to Trump’s inauguration in January, IMF announced promising forecasts, after it administration promised to reform the tax system, allocate huge spending for infrastructure projects, and renegotiate commercial agreements in order to boost long-term growth to 3 percent starting from 2018.
However, those procedures didn’t make progress in the congress. The IMF loudly doubts the government’s ability to fulfill its promises on the short term, pointing out that, the growth will likely be weaker than the budget’s estimations, and will require more time to be achieved, even amid a perfect recovery policy. The IMF also said the growth is unlikely to grow more than 1 percent as expected by Trump’s administration.