On 17 July 2024 the IMF issued a report following consultation with the US government under Article IV of the IMF’s articles of agreement.
The US economy has performed strongly in the past few years. Economic activity and employment now exceed the pre-pandemic expectations. Real incomes have risen above pre-pandemic levels, with fast growth in employment. However, income and wealth gains have been uneven, and poverty remains high. Also, the general government debt is expected to rise steadily and exceed 140% of GDP by 2032.
The ongoing disinflation process has affected economic activity only relatively slightly, and has been accompanied by higher productivity growth and expansion of the labour supply. The IMF report notes that determined action will be necessary to manage fiscal imbalances, financial vulnerabilities, and the increased inequality.
The IMF report considers that high fiscal deficits and the increasing debt-to-GDP ratio create risks not just for the US but also for the global economy. A frontloaded fiscal adjustment is necessary, involving both revenue and spending measures. Also, a structural, long term solution is required to manage issues related to the debt ceiling.
The IMF is encouraging the US government to implement the remaining recommendations of the OECD Working Group on Bribery phase IV. A more orderly approach to immigration would also be of benefit. The report notes that it remains important to continue addressing climate related issues.
The IMF report refers to the intensification of trade restrictions and the requirements for domestic content in some fiscal programs, creating risks for the US and the global economy. The IMF report encourages the government to unwind the obstacles to free trade and increase competitiveness through investment in human resources and the infrastructure. It is important to collaborate with international partners to manage the challenges facing the global trade and investment system, make efforts to strengthen the WTO and strengthen multilateral trading system.
