IMF warns of growing medium-term risks to US economy

26 June, 2019 12:00 AM printer

WASHINGTON: The Executive Board of the International Monetary Fund (IMF) on Monday warned of growing medium-term risks to the U.S. economy, noting that an "abrupt reversal" of the recent supportive financial market conditions or a deepening of ongoing trade disputes represent material risks to the U.S. economy.

"The financial system appears healthy but vulnerabilities in leveraged corporates and, potentially, in the nonbank system are elevated by historical standards," the IMF's executive board said in a statement after concluding its annual Article IV consultation to review the U.S. economy, reports Xinhua.

The executive board noted that the U.S. public debt-to-GDP ratio is on an unsustainable path and is expected to continue rising throughout the medium-term, as aging related spending rises.

The statement, which came a few days after a concluding statement that describes the preliminary findings of the consultation, said the consultation focused on the policies needed to address these risks, preserve financial stability, support the standard of living for low- and middle-income households, and rebuild fiscal space.

U.S. real GDP is expected to grow at an annual rate of 2.6 percent this year, before moderating to 1.9 percent in 2020, according to the statement.

"Continued vigilance, prudent macroeconomic policies, and supply-side reforms would be critical to securing strong, balanced, and inclusive growth, generating positive spillovers to the rest of the world," the IMF's executive board said. Despite positive macroeconomic outcomes, the executive board said "the benefits from this decade-long expansion have not been shared as widely as they could," urging the U.S. government to address rising income inequality and improve social outcomes.