Georgieva has described as “frustrating” that politicians do not end up with a “solvable problem”, in reference to the debt ceiling
MADRID, 26 (EUROPA PRESS)
The US economy will grow by 1.7% this year, although it will show a gradual slowdown as 2024 approaches, a year in which the GDP of the world’s leading power will advance by 1%, according to experts from the International Monetary Fund. (IMF) at the end of his mission in the country to prepare the annual report ‘Article IV’.
In the press conference following the preliminary publication of the document, the managing director of the IMF, the Bulgarian Kristalina Georgieva, stressed that, up to now, the US economy has proven to be “resilient”, especially on the demand side of the consumers. “This is good news”, she has assessed her.
The IMF has forecast growth for this year of 1.7%, although it will slow down in the fourth quarter to 1.2%. Looking to 2024, an increase in GDP of 1% is estimated.
In addition, unemployment will grow “slightly” by the end of this year to 3.8% and 4.4% in the following. “Even so, it will be a fairly robust labor market,” Georgieva said before adding that this has provided a “boost” to the income of American families, although it has also contributed to entrenching inflation.
This situation, in Georgieva’s opinion, will make it necessary to maintain a “long period of monetary tightening”, since inflation will stand at 2.6% at the end of 2024, while the underlying variable, which excludes prices from its calculation of food and energy due to its greater volatility, it will remain at 2.8%. Both figures are above the Federal Reserve’s (Fed) objective of limiting price rises to 2% year-on-year.
“Inflation continues to be intolerably high, especially core inflation, which reveals that there is still a lot of work to be done,” he explained.
In this sense, Georgieva has stressed that the IMF base scenario is for interest rates to remain “between 5.25% and 5.50% until the end of 2024”.
On the other hand, the IMF manager has warned that there is “high uncertainty” regarding the economic outlook and inflation, which has encouraged the US authorities to redouble their efforts to contain the gap in the federal budgets, from 5 .6% by 2023, and “put the public debt on a clearly downward path.”
Thus, the multilateral organization has recommended increasing income on the tax side and tackling “structural imbalances” in Social Security or Medicare. At the same time, this would contribute to “the [Departamento de] Treasury will help the Fed in its fight against inflation.
For her part, Georgieva has stated that trade liberalization policies “have contributed considerably to the growth of the United States” in the past, for which she has warned of the risk of fragmentation in global supply chains after the approval by of President Biden’s Administration of regulations such as the Inflation Reduction Act (IRA). Its objective is to promote the production of goods and services in the United States.
Regarding the debt ceiling, Georgieva recalled that “history shows that when we are on the precipice, it is when a solution is found”, and also that, up to now, the impact on the markets for not updating this limit is ” of little importance” and is limited to a situation of “anxiety”.
However, the Bulgarian economist has described as “frustrating for everyone” to have a “solvable problem” on hand that politicians have not addressed in due time. In addition, she has warned that if this limit is exceeded, we will enter “uncharted territory” with repercussions for the global financial system.