US tax cuts will boost growth in the short term, but bring risks in coming years the International Monetary Fund said in a report on the American economy released Thursday (June 14) in Washington.
IMF Managing Director Christine Lagarde took questions following the release of the preliminary conclusions by staff in the so-called Article IV report on the US economy, a survey that the Fund makes in cooperation with member countries usually on an annual basis.
“We believe that in the next few years the US economy will be entering its longest expansion in recorded history. The tax cuts and jobs act and the approved increase in spending are providing a significant boost in the economy,” Lagarde said.
The IMF sees US growth moderating at a faster pace than the Treasury Department predicts, said Lagarde. Currently it forecasts growth of 2.9% this year, but that slows to 2.7% in 2019 and drops to 1.9% in 2020.
“In my discussions with Secretary Mnuchin he was clear – and we agree on the very short term – but he was clear that he regards our medium-term outlook as too pessimistic. And frankly, I hope he is right, and that we are wrong. Because that would be good news for the US, and it would be good news for the global economy as well," she told reporters.
Lagarde also noted that in a trade war, there are no winners and that she hopes to see the US find ways of addressing disputes without resorting to tarrifs and barriers to imports.
“Unilateral trade actions can be disruptive and may prove counter-productive to the global economy and trading system. As I have said before, in a so-called trade war driven by reciprocal increases in import tariffs gives no winner and we find generally losers on both sides," she said.
The IMF has agreed to provide a $50 billion line of provisional credit backing an Argentine plan to reboot its economy after a series of shocks.
Lagarde said that she has been pleased with progress and cooperation with the government of Argentine President Mauricio Macri.
“Concerning Argentina I can assure you that we are very satisfied with the terms and conditions that have been agreed and settled between the staff of the IMF and the Argentine authorities. We have been in very close contact, we have worked together with great intensity and a very good spirit to support their efforts," Lagarde said.
A full copy of the report can be found at IMF.org.
