The International Monetary Fund has expressed concerns over the United States running excessive deficits and accumulating too much debt, along with cautioning against aggressive trade policies.
Despite acknowledging the US economy as strong and adaptable, the IMF delivered unusually harsh criticism towards its largest shareholder. The fund also revised its growth projection for the US slightly downwards to 2.6% for the year, a 0.1 percentage point drop from the earlier forecast in April.
In its annual assessment of the US economy, the IMF staff highlighted that the fiscal deficit is alarmingly high, leading to a continual increase in the public debt-GDP ratio. Additionally, the IMF pointed out that escalating trade barriers and insufficient efforts to address vulnerabilities exposed by recent bank failures could pose significant risks.
The IMF, known for monitoring global economic trends and providing emergency funding, has been increasingly vocal about its disapproval of US economic strategies, citing unsustainable borrowing practices and rivalry with China as threats to the worldwide economy.
The report also noted a lack of substantial actions taken to address financial risks since the bank failures in 2023, urging the US to fully enact the Basel III agreements, an international framework introduced post the 2008 financial crisis.
Projections for the 2024 fiscal year indicate a further widening of the US deficit, with estimates suggesting a ratio of 6.7% of GDP, up from a previous forecast of 5.3% in February. In contrast, the European Union advises member states to maintain deficits at 3% or lower, with the US historical average standing at 3.7% over the past fifty years as per the CBO.
Looking ahead, the IMF anticipates that without policy changes, US general government debt could surpass 140% of GDP by the year 2032.
