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IMF cautions of risks despite US economy reigning supreme

Jun '19
IMF cautions of risks despite US economy reigning supreme
The US economy is expanding faster than other developed nations, but the International Monetary Fund (IMF) and many economists have cautioned about signs of trouble building up. In its annual review of the US economy, IMF said ‘material risks’, including trade uncertainty, rising debt levels and growing inequality, overshadow the positive outlook.

IMF upgraded its forecast for US growth this year to 2.6 per cent, three tenths higher than it predicted in April, while growth in 2020 is seen slowing to just under 2 per cent.

For now, US data is showing little impact on the overall economy but global financial markets have been shaken by the trade conflict and the US Federal Reserve this week opened the door to cutting interest rates to salvage growth.

The US Commerce Department recently reported that the trade deficit fell in April. However, the deficit in goods trade with China expanded. Economists reportedly feel that falling imports and exports are a sign US economic momentum is weakening.

In contrast to the upgrade for the United States, the IMF this week trimmed the outlook for China to 6.2 per cent this year, a tenth lower than in April.

IMF chief Christine Lagarde recently flagged the concerns raised in the IMF report warning that public debt is on an unsustainable upward path and corporate debt is rising, leaving the economy vulnerable should interest rates rise.

And more action is needed to address inequality and help those hurt by the move to globalization and the increased use of technology, the IMF report said.

According to Lagarde, "the benefits from this decade-long expansion have, in general, not been shared as widely as they could have been." The United States has the highest poverty rate of any advanced economy and that life expectancy is falling, she noted.

"The wealth and income distribution are increasingly polarized. The poorest 40 per cent of households have a level of net wealth that is lower today than it was in 1983," the report said. (DS)

Fibre2Fashion News Desk – India

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