High US demand drives growth: Gita Gopinath

Washington. The United States needs to increase its revenues to reduce its high budget deficits, even though they help boost global growth by stimulating US domestic demand, said Gita Gopinath, first deputy managing director of the International Monetary Fund (IMF), on Saturday.

Gopinath noted that deficits in the United States – the largest global economy – are expected to rise for years with one of the steepest debt curves in the world.

“High deficit levels also support growth and demand in the United States, which has positive effects on the rest of the world.” “But along with that growth is coming higher interest rates and a stronger dollar, which is creating more complications for the world,” Gopinath explained, at a fiscal forum at the spring meetings of the IMF and World Bank. which concluded this Saturday in Washington.

The IMF’s fiscal monitor projects that the United States deficit by 2024 will reach 6.67 percent of gross domestic product (GDP), rising to 7.06 percent in 2025, double the 3.5 percent of 2015.

Gopinath said the IMF’s annual “Article IV” review of U.S. economic policies in the coming weeks will again recommend that Washington increase tax revenues and reform its costly Social Security and Medicare programs for older Americans to reduce costs. deficits.

The review will largely repeat recommendations from last year, when the US Congress was locked in a fight over raising the federal debt ceiling, which threatened a possible default that would have shaken global financial markets.

Gopinath said the IMF would again recommend that the United States find a way to approve government financing without reaching an agreement on the debt ceiling.

“It is certainly a risk that no one has to face,” Gopinath said. “This happens every year. There has to be a way to resolve this risky policy,” he stressed.

Asked about the prospects for a widespread debt crisis in developing countries, Gopinath said: “We don’t see a systemic debt crisis happening anytime soon.”

Although there are still several low-income countries facing debt difficulties, he said financial market conditions have improved and some countries with frontier markets have recently returned to the markets to borrow.