IMF warns the US over high poverty, inequality

The International Monetary Fund warned the United States over poverty and rising inequality in the country, saying both could hold back the country’s economic potential.

The IMF cut its outlook for US economic growth this year to 2.2 per cent, compared to 2.4 per cent forecast at the beginning of the year. It cited the impact of slower global growth overall, the contraction in the energy industry due to low oil prices, and a slowdown in domestic consumer spending.

The Washington-based global crisis lender said the US economy is in “good shape” generally, growing more strongly than other leading advanced economies, with unemployment at a nearly nine year low and inflation in check.

The world’s largest economy “has repeatedly demonstrated its resilience in the face of financial market volatility, a strengthening dollar, and subdued global demand,” the report said.

Yet it identified key trends in the economy that it said will slowly choke off avenues to future growth if not addressed soon, particularly a high level of poverty for a rich country and increasing inequality.

“Our assessment is that, if left unchecked, these four forces — participation, productivity, polarisation, and poverty — will corrode the underpinnings of growth (both potential and actual) and hold back gains in US living standards,” said IMF managing director Christine Lagarde.