On Thursday, the International Monetary Fund (IMF) made unusually harsh criticisms of its largest shareholder, the United States, regarding its deficits, debts, trade rules, and banking regulations. The IMF stated that the US has a large deficit, and excessive debt, and warned against the danger posed by the country's increasingly aggressive trade policy. Product structure, 10-30 billion yuan products operating income of 401/1288/60 million yuan respectively.
In its annual assessment summary of the US economy, IMF staff expressed:
The large fiscal deficit has led to a continuous increase in the ratio of public debt to GDP. The sustained expansion of trade restrictions and insufficient progress in addressing the vulnerability exposed by the 2023 bank collapse pose significant downside risks.
It is reported that as the global economic watchdog and final lender, the IMF has been increasingly critical of US economic policies, warning of unsustainable borrowing, creating economic risks around the world.
The IMF predicts that under current US policies, US government debt is expected to exceed 140% of GDP by 2032. The IMF stated that the United States urgently needs to reverse the trend of the continuous increase in the ratio of public debt to GDP. These long-term fiscal deficits represent significant and sustained policy mismatches that require urgent solutions.
Georgieva said at a news conference on Thursday:
US debt is sustainable and still sustainable. Debt levels have risen and deficits have risen. Yes, you can afford it. But if you can reduce it, you will have a stronger future development path.
This month, the Congressional Budget Office (CBO) raised its estimate of this year's US budget deficit by 27% to approximately $1.92 trillion. In terms of the proportion to GDP, it is expected that the US deficit will expand in the 2024 fiscal year. The latest estimate of this deficit is 6.7%, significantly higher than the 5.3% estimated in February. The average value of this ratio for the United States over the past half century is 3.7%. In contrast, EU countries are required to keep this ratio at or below 3%.
IMF stated in its report that the US has been lacking specific actions since a series of bank collapses exposed vulnerabilities in 2023. IMF recommended that the US comprehensively implement Basel III proposals, an international agreement reached after the 2008 financial crisis.
Regarding the US inflation situation, the IMF is more optimistic than the Federal Reserve. Georgieva said on the same day that the IMF expects that US inflation will continue to cool, and core CPI will be around 2.5% in 2024, which is expected to return to the Federal Reserve's target of 2% in the coming year. The Federal Reserve should keep interest rates unchanged at least until later this year, and may cut interest rates once this year and further cut interest rates next year.
The IMF believes that the United States should avoid implementing tariffs and should promote trade activities through dialogue.
The IMF slightly lowered its growth forecast for the US economy this year to 2.6%, which is 0.1 percentage point lower than the April forecast. However, the IMF also stated that the United States, the world's largest economy, is "strong, vibrant, and adaptable."
Earlier today, data showed that the final values of US GDP and core PCE expenditures for the first quarter of this year were slightly revised upward. The final value of actual US GDP in the first quarter was 1.4%, a slight increase of 0.1 percentage points from the revised value of 1.3%; the annualized quarter-on-quarter final value of core PCE increased by 3.7%, a slight increase of 0.1 percentage points from the previous value of 3.6%.
Recent data show that the US economy is still on a soft landing trajectory, despite signs of slowing down. The unemployment rate has risen slightly, retail sales have slowed down, and new home sales have fallen sharply in May. Due to weakness in business conditions, the job market, and income prospects, consumer confidence has weakened this month.
According to a statement from the US Treasury Department, US Treasury Secretary Yellen reiterated the importance of candid and comprehensive assessments of all IMF member economies through the annual surveillance program during her meeting with IMF Managing Director Georgieva today. The statement also said that when the IMF board of directors approves the final report next month, it plans to publish all documents related to the IMF evaluation, including the so-called fourth review, which includes the US response.
Editor/Emily