## IMF Executive Board Concludes 2021 Article IV Consultation with the United States

_IMF News, July 22, 2021_

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## Bibliographic details
- Published: July 22, 2021

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### Overview
- The Executive Board concluded the Article IV consultation with the United States on July 19, 2021.
- The U.S. pandemic resulted in close to 600,000 deaths.
- New cases of COVID-19 and the test positivity rate fell significantly in 2021, aided by mask mandates, social distancing, shut down orders, and over half the eligible population being fully vaccinated.
- The receding case numbers are expected to allow normal activities to resume and provide a substantial economic boost.

### Economic outlook and near-term dynamics
- The U.S. economy is expected to grow by around 7 percent in 2021 as:
  - savings are drawn down,
  - demand shifts back to in-person services,
  - depleted inventories are rebuilt.
- Disruptive supply and demand mismatches are possible as the economy normalizes, including in the labor market, but these are expected to be transitory.
- The significant employment gap should help contain wage and price pressures.

### Policy support underpinning the recovery
- Fiscal support:
  - The American Rescue Plan (adopted March 2021) contained 8.2 percent of GDP in federal spending, in addition to the December fiscal package.
  - Fiscal support included extensions for small businesses, expanded unemployment insurance, and household transfers via stimulus checks.
  - These packages supported demand, helped avoid corporate bankruptcies, and relieved financial stress on households and state and local governments.
- Monetary policy:
  - The Federal Reserve committed to allow inflation to overshoot the 2 percent target in the near term.
  - This facilitated accommodative monetary policy amid low neutral rates and provided clear forward guidance tied to actual inflation outcomes and inflation expectations.

### Administration policy proposals and fiscal outlook
- The American Jobs Plan and American Families Plan propose:
  - redistributing resources toward vulnerable households,
  - investing in infrastructure,
  - incentivizing human capital accumulation and labor force participation,
  - improving productivity,
  - reducing carbon emissions and increasing climate resilience.
- Proposed revenue measures include:
  - higher statutory corporate tax rate,
  - a global minimum tax,
  - increases in the top marginal rate of personal income tax,
  - increases in the rate high income earners pay on capital gains.
- On a net basis, the Administration’s fiscal plans would leave federal government debt 3¼ percent of GDP higher at end-2030.

### Executive Board assessment: key findings
- Directors agreed with the thrust of the staff appraisal and welcomed pandemic control efforts and strong policy support.
- Noted costs and vulnerabilities:
  - Significant increase in public debt.
  - Widening current account deficit.
  - Increased corporate and nonbank leverage with rising asset valuations.
  - Pandemic’s heavy toll on low income households.
- Outlook caveats:
  - Outlook subject to evolution of the pandemic and congressional adoption of proposed fiscal measures.

### Executive Board recommendations and policy priorities
- Fiscal policy:
  - Policy adjustments necessary to lower the fiscal deficit and put public debt on a gradual downward path over the medium term.
  - Consider raising revenues, including through a carbon tax, higher taxation of fuels, and a broad-based federal consumption tax.
  - Lessen the impact of an aging demographic on future spending.
  - Better targeting of spending to strengthen macroeconomic and distributional outcomes and trigger larger boosts to aggregate supply.
- Tax policy and administration:
  - Welcomed proposals to increase taxes on corporates and high-income households, close tax loopholes, remake the international corporate tax system, and increase resources for the Internal Revenue Service.
- Monetary policy and communication:
  - Noted Federal Reserve actions were highly effective; endorsed near-term overshooting of the two-percent inflation target under the new framework.
  - Urged the Fed to communicate well in advance to ensure orderly and transparent withdrawal of asset purchases and monetary accommodation.
- Financial stability and market structure:
  - Systemic financial stability risks appear close to the historical average, but pandemic revealed shortcomings in stress functioning of systemically important U.S. markets and institutions.
  - Urged serious consideration of structural changes in the operation of the Treasury market, key money markets, and prime money market funds.
- External sector and trade:
  - Noted the current account deficit increased during the pandemic and the external position is weaker than implied by medium-term fundamentals and desirable policies.
  - Urged the authorities to roll back trade restrictions and tariff increases and avoid currency-related trade responses.
  - Encouraged constructive U.S. engagement with trading partners to strengthen the rules-based multilateral trading system.

### Procedural note
- It is expected that the next Article IV consultation with the United States will be held on the standard 12-month cycle.

### United States: Selected Economic Indicators (Projections)
- Real GDP (annual growth)
  - 2019: 2.2
  - 2020: -3.5
  - 2021: 7.0
  - 2022: 4.9
  - 2023: 1.9
  - 2024: 1.7
- Real GDP (q4/q4)
  - 2019: 2.3
  - 2020: -2.4
  - 2021: 8.0
  - 2022: 2.8
  - 2023: 1.8
- Unemployment rate (q4 avg.)
  - 2019: 3.6
  - 2020: 6.8
  - 2021: 4.4
  - 2022: 3.1
  - 2023: 3.0
  - 2024: 3.2
  - 2025: 3.4
- Current account balance (% of GDP)
  - 2019: -2.2
  - 2020: -3.1
  - 2021: -3.8
  - 2022: -3.6
  - 2023: -3.4
  - 2024: -3.0
  - 2025: -2.7
  - 2026: -2.5
- Fed funds rate (end of period)
  - 2019: 0.1
  - 2020: 0.2
  - 2021: 0.7
  - 2022: 1.4
  - 2023: 2.1
- Ten-year government bond rate (q4 avg.)
  - 2019: 0.9
  - 2020: 2.4
  - 2021: 2.7
- PCE Inflation (q4/q4)
  - 2019: 1.5
  - 2020: 1.2
  - 2021: 4.3
  - 2022: 2.0
- Core PCE Inflation (q4/q4)
  - 2019: 1.6
  - 2020: 3.7
  - 2021: 2.6
  - 2022: 2.5
- Federal fiscal balance (% of GDP)
  - 2019: -4.6
  - 2020: -14.9
  - 2021: -15.1
  - 2022: -8.0
  - 2023: -5.7
  - 2024: -4.8
  - 2025: -4.5
- Federal debt held by the public (% of GDP)
  - 2019: 79.2
  - 2020: 100.1
  - 2021: 104.9
  - 2022: 103.6
  - 2023: 105.8
  - 2024: 106.6
  - 2025: 107.3

*IMF Executive Board Concludes 2021 Article IV Consultation with the United States, Press Release No. 21/224 (July 22, 2021).*

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## References

- [https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)
- [The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)
- [IMF COVID-19 Hub](https://www.imf.org/en/Topics/imf-and-covid19)
- [Policy Tracker](https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19)
- [Financial Assistance](https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-Tracker)
- [Questions & Answers](https://www.imf.org/en/About/FAQ/imf-response-to-covid-19)
- [United States and the IMF](http://www.imf.org/external/country/USA/index.htm)
- [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2021/07/22/pr21224-united-states-imf-executive-board-concludes-2021-article-iv-consultation_