The United States economy is continuing to show its resiliency, as economists are predicting that it will continue to grow faster than any other large advanced economy, just like it did last year.
The IMF’s World Economic Outlook reported that US GDP grew 2.5% in 2023, which was the highest among the G7 economies, with the next closest being Japan at 1.9%.
Now, the IMF is forecasting that the US is going to go back-to-back in 2024, with GDP expected to grow 2.1% this year, with the next closest forecasted to be Canada at 1.4%.
The report comes as every country continues to fight the same problems after the pandemic left rising inflation and high-interest rates.
Still, thanks to several factors, the US was able to keep its head above water and continue to make progress. One of these factors was the US labor force, which continued to surge, adding 2.7 million jobs in 2023 as people continued to join the workforce.
The corporate sector also played a role in the nation’s economic growth, along with Biden administration policies that included investing in infrastructure and manufacturing capacity.
White House economic adviser Lael Brainard told reporters last week that the Biden administration’s “strong policy actions that were designed to lead to a strong and broad-based recovery faster than we have seen previously in the US — and faster than we saw in other countries.”
As for other countries that are succeeding, Japan was second in 2023 with economic growth, but unlike the US, Japan has lower immigration rates and a shrinking population, leading to growth being slower.
In the United Kingdom, growth is being hindered by the supply disruptions sparked by Brexit.
Other major European economies have been struggling with energy, as they are reliant on Russian oil and natural gas, making economic growth more challenging.
When it comes to potential upsides for global economies this year, the report cited investments in AI could help spur productivity, though it comes with significant challenges for workers. Other positives included disinflation, which the report says could happen sooner rather than later.
“Disinflation could happen faster than anticipated, especially if labor market tightness eases further and short-term inflation expectations continue to decline, allowing central banks to ease sooner,” the report said.
Still, the IMF says that overly optimistic outlooks about inflation and potentially slashed interest rates could lead to problems if trends don’t continue in the right direction.
“Should investors re-assess their view, long-term interest rates would increase, putting renewed pressure on governments to implement more rapid fiscal consolidation that could weigh on economic growth,” the report said.