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The US Public Debt: A Potentially Systemic Risk for the Global Economy, Warns International Monetary Fund

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The International Monetary Fund (IMF) reports that the situation around raising the US national debt ceiling could lead to systemic risks for both the US and the global economy.

The Fund said in a statement Friday following its annual review of the US economy: The current environment “may create additional avoidable systemic risks for the US and the global economy.”

US GDP Growth Forecasts

The revision includes the International Monetary Fund slightly improving its forecast for US GDP growth in 2023 to 1.7 percent.

In the document, the organization predicted the growth of the US economy in 2023 by 1.6 percent (on May 26, the Fund raised this figure by 0.1 percentage points), and in 2024 by 1.1 percent (this figure was reduced by 0.1 percent). ). .

inflation expectations

For her part, Kristalina Georgieva, CEO of the International Monetary Fund, said during a press conference that expectations indicate that US inflation this year and next will exceed the target set by the US Federal Reserve (central bank). .

The International Monetary Fund said lowering inflation “will require an extended period of tight monetary policy to keep the benchmark interest rate at 5.25-5.5 percent until the end of 2024.”

However, the Fund acknowledges that “the large and sharp increase in the interest rate that has already begun may not be enough to quickly return inflation to the target.” The authors of the document note that “there is a significant risk that the Federal Reserve will have to raise interest rates by a much larger amount than currently expected to bring inflation back to 2%.”

Republicans in the U.S. House of Representatives are consulting with aides to U.S. President Joe Biden about raising the national debt ceiling to prevent a possible default on the country’s federal debt. Members of Congress are calling for drastic cuts in government spending as a condition for raising the national debt ceiling.

Source: TASS

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