(Bloomberg) -- The International Monetary Fund’s deputy research head warned that the U.S. can’t continue expanding beyond its potential growth rate for very long, even as the fund left its growth forecast for the world’s largest economy unchanged, adding that Washington will need to address its budget deficit.
“In the U.S. we have what we call pro-cyclical fiscal policy, we have the economy virtually at full employment but a large fiscal deficit and that is something that will have to be addressed,” Gian Maria Milesi-Ferretti, deputy director of the IMF’s research department, told Tom Keene in a Bloomberg TV interview from Davos.
The IMF on Monday cut its forecast for the world economy, predicting it will grow at the weakest pace in three years in 2019 and warning fresh trade tensions would spell further trouble. Still, the fund left its projection for the U.S. unchanged at 2.5 percent.
“The U.S. comes out of a very protracted expansion,” Milesi-Ferretti said. “But it cannot continue to grow much above its potential growth rate for a very long time simply because the unemployment rate is already so low.”