The International Monetary Fund has sharply revised its forecast for US economic growth in a direct indictment of Donald Trump’s presidency and lack of action on promised policy changes.
The IMF downgraded its forecast for US gross domestic product growth to just 2.1% this year, down from 2.3% previously, and also cut its 2018 estimate to 2.1% from 2.5%.
That revision is especially striking since it matched cuts not seen anywhere in the world other than two major emerging economies facing deep political crises — Brazil and South Africa.
The reasoning behind the IMF’s shift in views reflected a stalled Trump economic agenda, as even financial markets have pared back expectations for potential tax cuts and infrastructure spending.
“The major factor behind the growth revision, especially for 2018, is the assumption that fiscal policy will be less expansionary than previously assumed, given the uncertainty about the timing and nature of U.S. fiscal policy changes,” the IMF report said. “Market expectations of fiscal stimulus have also receded.”
The repeated failure of Trumpcare, the Republican effort to rollback President Barack Obama’s healthcare legislation, has sowed doubt over the ability of a Republican president and a Republican-controlled Congress to agree among themselves on other major issues.
Several ongoing investigations into the president and his team’s conduct as it relates to Russian contacts during and after the 2016 election campaign have deepened US political uncertainty, making it harder to accomplish any major legislation at all this year.
Compass Point Research, an investment firm, had this brutal assessment:
“Six months into President Trump’s administration, there have been no signature legislative accomplishments, health care repeal appears stalled, tax reform has yet to show any public signs of progress, there is a seemingly constant barrage of investigation headlines, presidential pardoning power is a topic of conversation among real and imagined legal scholars, and the window for acting on the GOP’s legislative agenda is closing. With a quarter of the 115th Congress already elapsed, there has been no tangible evidence that the GOP is capable of legislating in a meaningful manner as nearly half of the bills signed into law thus far have either reversed Obama-era regulations or dealt with relatively minor matters (e.g., naming a courthouse, the illusive search for weather report accuracy).”
IMF chief economist Maurice Obsfelt said in a blogpost the Fund’s “most important downgrade is the United States. Near-term U.S. fiscal policy looks less likely to be expansionary than we believed in April,” he adds. Here’s how the rest of the world looks according to IMF forecasts:
IMF cuts 2018 US growth forecast to 2.1% from 2.5%, the biggest downward revision of all major economies (only matched by Brazil & S Africa) pic.twitter.com/8CyXS7VYd1
— Jamie McGeever (@ReutersJamie) July 24, 2017