Washington, July 27 (QNA) – The U.S. economy forecast growth of 1.7 percent this year and 2.7 next year, both down 0.2 percentage point from the organization’s April projections, the International Monetary Fund (IMF) said in its annual report.
Growth of U.S. economy will remain tepid through 2013, before accelerating in 2014, it said.
The IMF said the U.S. economic recovery remains modest but is gaining ground, supported by a rebound in the housing market, still easy financial conditions, and a boost to household net worth from higher house and stock prices.
While believing the Federal Reserve has a range of tools to manage the normalization of monetary policy, the IMF cautioned that initial steps taken by the U.S. central bank could result in an abrupt increase in the longer-term interest rates, should investors rush to offload their Treasury holdings to avoid greater capital losses down the road. The increase in market turbulence since late May is illustrative in this regard.
The IMF stressed the fiscal consolidation should be more balanced and gradual. The automatic spending cuts, known as sequester, not only reduce growth in the short term but could also undermine potential in the medium term through indiscriminate cuts to education and infrastructure. “They should be replaced with back-loaded entitlement savings and new revenues.” (QNA)
QNA 0703 GMT 2013/07/27