The International Monetary Fund (IMF) cut its outlook for the United States economy, removing assumptions of President Donald Trump's plans to cut taxes and boost infrastructure spending to spur growth.
The IMF forecasts that the USA economy will grow this year at an annual rate of 2.1 percent.
Instead, the fund forecasts the growth rate will steadily fall over the next five years to around 1.7%, assuming no major policy changes.
The world's biggest economy will probably have a hard time hitting Mr. Trump's target of 3 percent annual growth as it's faced with problems ranging from an aging population to low productivity growth, and with a labor market already back at full employment, the fund said in its annual assessment of the USA economy released Tuesday.
Worldwide experience and USA history suggest a sustained acceleration in annual growth of more than 1 percentage point is unlikely, the IMF said.
President Trump is promising to get US economic growth up to 3% a year during his first term.
The assumptions for those forecasts appeared to have evaporated in the face of a lack of details over the Trump tax plan and the $3.6 trillion in government spending cuts proposed in the administration's budget plan in late May.
"A comprehensive policy package is needed", the report said.
On a more positive note, the International Monetary Fund noted how GDP was 12% higher than its pre-recession peak with job growth persistently strong and, despite, measurement uncertainties, the U.S. economy "appears to be back at full employment". The IMF now says the economy will expand by 2.1% this year and next. It also supports budget belt-tightening to slim the deficit and trim public debt, and boosting infrastructure spending.
"The U.S. ought to be judicious in its use of import restrictions on national security grounds and avoid measures that inadvertently weaken, rather than strengthen, the overall economy", it said. The US are now in the third-longest period of economic growth since 1850, given the full employment situation, but this hardly makes things any better, as disposable incomes are low, as is purchasing power, whilst the burden of household indebtedness is stunning.
The IMF, therefore, appears to be increasingly bankrupt, both morally, and in terms of applicable economic ideas, but the Trump administration had better hurry up indeed delivering on their higher growth promises, as the risks of a recession hitting sometime between 2018-2020 are now heightened. The IMF recommended the USA raise taxes on consumption, carbon emissions and gas.