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IMF cuts US growth outlook, cites uncertainty around Trump pol

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An investor looks at an electronic board showing stock information of Shanghai Stock Exchange Composite Index at a brokerage house in Beijing

The International Monetary Fund (IMF) cut its outlook for the USA economy, removing assumptions of President Donald Trump's plans to cut taxes and boost infrastructure spending to spur growth.

The IMF cut its forecast for US economic growth for this year to 2.1% from a previous estimate of 2.3%. That would be an improvement over last year's lackluster 1.6 percent growth rate but down from the IMF's April forecast for growth this year of 2.3 percent.

The IMF, after a review of USA economic policy, said the Trump administration was unlikely to achieve its goal of annual GDP growth of 3 percent over a sustained period, partly because the labor market is at a level consistent with full employment. These economic changes mean that half of USA households have lower incomes now than they did in 2000, and the economy is not doing enough to spread income growth.

That target is "an extremely optimistic growth assumption", the IMF's economists said. The IMF now says the economy will expand by 2.1% this year and next.

The IMF warned that "significant policy uncertainties imply larger-than-usual" risks to the United States outlook on either side, since spending cuts could lower growth, while tax cuts could provide stimulus and expand the economy.

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.

"A comprehensive policy package is needed" to respond to those challenges, the report said.

"Even with an ideal constellation of progrowth policies, the potential growth dividend is likely to be less than that projected in the budget and will take longer to materialize", the International Monetary Fund said. But the fund says the administration's plan doesn't add up.

An IMF assessment says the American economy is struggling to adapt to low productivity growth, technological changes that are reshaping the labor market, and an aging population.

The fund also warned against a White House plan to invoke national security to raise tariffs on steel imports, saying there was room for renegotiating trade deals such as the North American Free Trade Agreement in a way that was mutually beneficial.

The report came out as the US Senate is debating a controversial health care reform bill aimed at overturning Obamacare, which the non-partisan Congressional Budget Office said would cause an additional 22 million people to lose their health insurance by 2026.

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