IMF upgrades US growth forecast but warns of rising risks

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The US economy is expected to grow slightly faster this year than projected in April but is overshadowed by “material risks” including damage from the China trade conflict, the International Monetary Fund said on Thursday.

The IMF upgraded its GDP forecast for 2019 to 2.6 per cent, three tenths higher than in April, while growth in 2020 is seen slowing to two percent, according to the annual review of the US economy.

But the fund once again warned that risks are rising, including rising debt levels and growing inequality.

“It is especially important that the trade tensions between the US and China -- which represent a threat to the global outlook and create important negative spillovers to other countries -- are quickly resolved,” the report said.

In contrast the upgrade for the United States, the IMF earlier this week trimmed the outlook for China to 6.2 per cent this year, a tenth lower than in April.

And IMF chief Christine Lagarde earlier on Wednesday urged the countries to make resolving the trade conflict a priority, since it threatens growth of the global economy, which has already begun slowing.

The report notes that the US economy in July will hit a milestone reaching “the longest expansion in recorded US history.”

But while “the economy has repaired the damage wrought by the financial crisis,” the IMF warned that public debt is on an unsustainable upward path, corporate debt is rising, and more action is needed to address inequality and help those hurt by the move to globalization and the increased use of technology.

“A deepening of ongoing trade disputes or an abrupt reversal of the recent ebullient financial market conditions represent material risks to the US economy, the report said.

And Americans have not shared in the expansion, with median household income rising only 2.2 percent from the end of the last century, even though the economy has expanded 23 percent per capita.

“The wealth and income distribution are increasingly polarized,” the report said. “The poorest 40 percent of households have a level of net wealth that is lower today than it was in 1983.”

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