US economy to outpace G7 peers with double GDP growth rate this year, claims IMF

IMF projects US GDP growth at 2.7%, surpassing other G7 nations.

US has a 2x rate of GDP growth relative to any other G7 country this year, as per International Monetary Fund (IMF) projections, while its economy gains the upper hand globally, creating wild market swings by itself.

International Monetary Fund (IMF) Chief Economist Pierre-Olivier Gourinchas holds the IMF's World Economic Outlook during a press briefing at the IMF-World Bank Group spring meetings at IMF headquarters in Washington, DC on April 16, 2024. (Photo by Mandel NGAN / AFP)(AFP)

The strong uptick in household spending and investment is projected to deliver GDP growth up to 2.7% this year, based on the latest forecasts by the Fund's World Economic Outlook.

Unlike the expected 2.5 per cent for 2023 declared, the updated estimate represents a 0.6 percentage point rise in outlook.

The outlook is the US economy’s manifestation as the engine for global growth, since worldwide investors declined their own expectations for the Federal Reserve interest rate cuts.

IMF forecasts strong uptick

The IMF drill adds that the next best G7 performer this year is Canada, ahead of Germany and the rest, with the growth predicted at 1.2%.

IMF has projected that Germany’s economic growth will be the most modest among the G7 nations, with an anticipated increase of only 0.2%. In comparison, Japan is expected to see a growth of 0.9%, while the UK’s economy is predicted to expand by a mere 0.5% after experiencing no growth in 2023.

On Tuesday, global stock markets experienced a downturn, and Asian currencies faced depreciation due to a strengthening US dollar. This was a consequence of a sell-off on Wall Street, triggered by robust US retail sales data, which indicated that the Federal Reserve (Fed) might implement fewer rate cuts this year than previously anticipated.

Pierre-Olivier Gourinchas, the IMF’s chief economist, conveyed to the Financial Times that although the initial expectation was for three quarter-point reductions in the Fed’s interest rates this year, the thriving US economy might alter this trajectory.

“If the inflation pressures persist beyond what we have right now, in the US in particular, then we would expect that they would have later cuts and maybe fewer cuts,” he stated.

Gourinchas also mentioned the possibility of the Fed postponing rate cuts from the summer to the fourth quarter, which could extend beyond the November presidential election, should inflation exceed the IMF’s forecasts.

Currently, market participants are anticipating the Fed to lower interest rates by September, with the potential for additional cuts before the year concludes.