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IMF / US ECONOMY
STORY: IMF / US ECONOMY
TRT: 2.44
SOURCE: IMF
RESTRICTIONS: NONE
LANGUAGE: ENGLISH / SPANISH / NATS
DATELINE: 22 JULY 2014, WASHINGTON DC / FILE
RECENT, WASHINGTON, DC
1. Wide shot, IMF
22 JULY 2014, WASHINGTON, DC
2. SOUNDBITE (English) Nigel Chalk, Mission Chief to the US, IMF:
“The first quarter was a terrible first quarter for US, but since around in March, we've seen much better data. We've seen better consumption data. We've seen stronger employment growth. All of these things together give quite a lot of optimism that US is set to grow around three percent, going into the next three quarters and into next year.”
RECENT, WASHINGTON, DC
3. Wide shot, US Capitol
22 JULY 2014, WASHINGTON, DC
4. SOUNDBITE (English) Nigel Chalk, Mission Chief to the US, IMF:
“We know the demographics will slow labor force growth, and we know it's going to be challenging to meet the productivity gains that the US has seen in the past decades. So, we think there does need to be a policy effort. We think that policy effort needs to be targeted at raising productivity. That could be through investments in research and development, investments in education, investments in job training and apprenticeship programs. We also see some scope for expanding the US labor force through bringing people into the labor force; for example, through childcare assistance for working mothers, but also through immigration reform that will help bring skilled people back into the US labor force.”
RECENT, WASHINGTON, DC
5. Wide shot, US Federal Reserve building
22 JULY 2014, WASHINGTON, DC
6. SOUNDBITE: (English) Nigel Chalk, Mission Chief to the US, IMF:
“US monetary policies provide a very supportive role so far in the recovery. The challenge ahead, really, is now to move from the very low interest rates we've seen over the past five years to a more normal setting of monetary policy; and to do so without creating financial market volatility, without impacting investment and consumption decisions, and to do so without having spillovers to the global economy, as well. Now we think one aspect of this that would really help is better communication. And one aspect of better communication - we think there could be more frequent press conferences after each Federal Reserve meeting.”
RECENT, WASHINGTON, DC
7. Tilt down, check cashing facility
22 JULY 2014, WASHINGTON, DC
8. SOUNDBITE (Spanish) Juan Sole, Western Hemisphere Department, IMF:
“50 million Americans live in poverty today. That's one in six out of the population, and perhaps more poignantly, one in four American children live in poverty in one of the richest countries in the world. So, in this sense, the fund has recommended a series of measures focused on reducing the impact of poverty in the country. These measures include an expansion of one the most important income tax credits in the United States as well as a rise in minimum wage.”
RECENT, WASHINGTON, DC
9. Wide shot, US Capitol
22 JULY 2014, WASHINGTON, DC
10. SOUNDBITE (Spanish) Juan Sole, Western Hemisphere Department, IMF:
“The debt level of the US economy now is very high, around 105 percent of GDP, including state and local governments. That's an uncomfortably high level for a country like the US. More than that, under today’s policies, if nothing changes by 2019, the debt level of the US government is going to start rising again. For this reason the Fund has recommended this year that measures are taken in order to reduce the rise of the debt in the medium and long terms.”
RECENT, WASHINGTON, DC
11. Wide shot, US Capitol
The US recovery is gathering steam but boosting potential growth and carefully beginning to raise interest rates remain top priorities, the International Monetary Fund said in its most recent report on the world’s largest economy.
Economic activity in the United States accelerated in the second half of 2013, but an unusually harsh winter conspired with other factors—including a still-struggling housing market, an inventory correction, and slower external demand—causing momentum to fade. Output tumbled to -2.9 percent in the first quarter of 2014—the first quarterly contraction since early 2011.
The IMF expects growth to accelerate in the remainder of this year (in the 3–3½ percent range), as employment improves, firms boost production, sales and orders of durable goods pick up, and confidence returns. The large drag from the first quarter contraction will be tough to offset, however, and growth for the year as a whole will be a disappointing 1.7 percent. Still, the IMF expects growth to accelerate in 2015 to the fastest annual pace seen since 2005.
“The first quarter was a terrible first quarter for US, but since around in March, we've seen much better data. We've seen better consumption data. We've seen stronger employment growth. All of these things together give quite a lot of optimism that US is set to grow around three percent, going into the next three quarters and into next year.” said Nigel Chalk, the IMF Mission Chief to the US.
Chalk said “we know the demographics will slow labor force growth, and we know it's going to be challenging to meet the productivity gains that the US has seen in the past decades. So, we think there does need to be a policy effort. We think that policy effort needs to be targeted at raising productivity. That could be through investments in research and development, investments in education, investments in job training and apprenticeship programs. We also see some scope for expanding the US labor force through bringing people into the labor force; for example, through childcare assistance for working mothers, but also through immigration reform that will help bring skilled people back into the US labor force.”
Without further policy interventions, the IMF expects potential growth to level off at around 2 percent in the coming years given the drag from population aging on labor force expansion and slower productivity growth. This is well below the average potential growth rate of over 3 percent seen in the decade before the financial crisis. The IMF recommends policies to counter this decline in longer-term growth including greater investment in US infrastructure, improving educational outcomes, a better tax system, and building a skilled labor force (including through immigration reform, job training, and providing childcare assistance for working families).
Turning to monetary policy, the goal for US Federal Reserve is to begin to raise interest rates in a manner that allows the economy to return to full employment without stoking inflation while avoiding financial instability and negative spillovers to the global economy. To facilitate this process, the IMF recommends the Fed expand its communications toolkit, including giving consideration to scheduling press conferences by the Fed Chair after each Federal Open Market Committee meeting and publishing a quarterly monetary policy report that is endorsed by the committee.
“US monetary policies provide a very supportive role so far in the recovery. The challenge ahead, really, is now to move from the very low interest rates we've seen over the past five years to a more normal setting of monetary policy; and to do so without creating financial market volatility, without impacting investment and consumption decisions, and to do so without having spillovers to the global economy, as well. Now we think one aspect of this that would really help is better communication. And one aspect of better communication - we think there could be more frequent press conferences after each Federal Reserve meeting,” Chalk said.
Despite improving growth and rising employment, almost 50 million Americans still live in poverty, unable to earn enough to meet their basic needs, and this includes almost one-in-four American children. Improved employment prospects and economic growth will be essential to bringing this number down, but the IMF argues for an expansion of the Earned Income Tax Credit and an increase in the minimum wage as part of the solution.
“50 million Americans live in poverty today. That's one in six out of the population, and perhaps more poignantly, one in four American children live in poverty in one of the richest countries in the world. So, in this sense, the fund has recommended a series of measures focused on reducing the impact of poverty in the country. These measures include an expansion of one the most important income tax credits in the United States as well as a rise in minimum wage.” Said Juan Sole of the Western Hemisphere Department of the IMF.
The IMF also continues to recommend a credible deficit and debt reduction plan so as to tackle longer-term debt dynamics while leaving flexibility to reduce poverty and encourage longer-term growth. The IMF recommends that the fiscal plan should include steps to lower the growth of health care costs, reform social security, and increase tax revenues.
“The debt level of the US economy now is very high, around 105 percent of GDP, including state and local governments. That's an uncomfortably high level for a country like the US. More than that, under today’s policies, if nothing changes by 2019, the debt level of the US government is going to start rising again. For this reason the Fund has recommended this year that measures are taken in order to reduce the rise of the debt in the medium and long terms,”
Sole said.
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