The International Monetary Fund concluded the U.S. economy is currently solid but warned that poverty remains too high and threatens to undermine growth.
On June 23, IMF Managing Director Christine Lagarde unveiled the organization’s assessment of the U.S. economy during a press conference, announcing the projection of growth within 2016 had been downgraded, Reuters reports.
The IMF currently expects economic growth at 2.2 percent, a marginal step down from the projection of 2.4 percent that had been predicted in April. Lagarde added that that number is expected to rebound to 2.5 percent in 2017, reports Reuters..
Lagarde added that the U.S. dollar is being undervalued in the international market by a range of 10 to 20 percent. She attributed this persistent uncertainty in the global market.
Citing that the unemployment rate had reached an eight-year low of 4.7 percent, Lagarde stated the U.S. economy was, overall, “in good shape,” reports The Atlantic.
The managing director added that the most dangerous threats to the U.S. economy were sliding labor-force participation, shrinking productivity growth, income inequality and poverty.
The IMF found that 46.7 million Americans, or roughly 15 percent of the U.S. population, were living in poverty. Lagarde noted that women were particularly impacted, citing that 1 in 3 households with women as the main provider were impoverished.
“Not only does poverty create significant social strains, it also eats into labor force participation, and undermines the ability to invest in education and improve health outcomes,” Lagarde said, according to the BBC.
She added: “If left unchecked, these four forces -- participation, productivity, polarization and poverty -- will corrode the underpinnings of growth and holds back gains in U.S. living standards.”
Lagarde recommended that U.S. lawmakers take urgent steps to remedy the poverty rate.
“Policies need to help lower income inequality households -- including through a higher minimum wage, more generous earned income tax credit, and upgraded social programs for the nonworking poor,” Lagarde said.
To provide incentives to get back into the workforce, Lagarde urged lawmakers to pass “paid family leave to care for a child or a parent, child care assistance, and a better disability insurance program ... Sensible skills-based immigration reform could also raise the labor supply and boost productivity.”
The managing director added that lawmakers could help improve the sluggish productivity rate with “A better tax system, efforts toward more trade integration, better infrastructure, a stronger and more vocationally oriented education system would all support higher productivity growth.”