US says IMF economic outlook too pessimistic

Suggested remedies run counter to free markets, White House point man says

by AFP
US says IMF economic outlook too pessimistic
You're Fired: US President Donald Trump is removed by a member of the secret service from the Brady Briefing Room of the White House in Washington, DC, on August 10, 2020. Secret Service guards shot a person, who was apparently armed, outside the White House. Trump said just after being briefly evacuated in the middle of a press conference. Photo: Brendan Smialowski/AFP

Washington, United States: The International Monetary Fund (IMF) is too gloomy in its outlook for US growth and oversteps its mandate in calling for Washington to reshape the American economy, a US official said Monday.

In its annual review of the US economy, the fund said Washington has the financial firepower to fix the health care system, better support poor families with improved aid programmes and tax credits, and improve jobless benefits to include self-employed workers.

Mark Rosen, US representative to the fund's board, said he agrees the government has ample resources available to deal with the pandemic. "Our authorities disagree, however, that they should use available fiscal space to 'broadly remake' the US economy."

He faulted the IMF for veering into social issues, saying "this dynamic detracts from the usefulness and impact of the report."

"Economies are neither made nor remade but emerge from millions of citizens' independent decisions, and dirigisme runs contrary to the spirit of free enterprise that undergirds the US economy," he said in a statement included in the full report.

GDP contraction

In the initial summary released July 17, the IMF staff predicted a 6.6% contraction of American GDP this year compared with 2019, and 3.9%growth in 2021, but Rosen called that "too pessimistic."

"Given a high degree of uncertainty, we do not place much confidence in point estimates of GDP growth," he said, adding that the fund's analysis possibly "assumed limited additional stimulus."

However, the White House and Congress have not been able to bridge their differences over the size and structure of a new emergency spending bill. President Donald Trump over the weekend announced limited measures to bridge the gap and try to put pressure on Democratic leaders to come to the table.

Rosen, who also rejected the IMF critique of Trump administration trade policy, said the US government believes the recovery will pick up speed as states reopen.

But many states, facing surging coronavirus cases, have been forced to impose restrictions, while schools in many districts are struggling to reopen safely.

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