Dale...Greenie must read this report last week...That's why we have a rate cut...
Saturday April 21 2:59 PM ET
IMF Cuts U.S. Economic Growth Forecast
By Mark Egan
WASHINGTON (Reuters) - The International Monetary Fund (news - web sites) expects the U.S. economic slowdown to be short-lived but predicts even slower growth this year than it had expected just a few weeks ago, IMF sources said on Saturday.
The sources in Washington said the final draft of the Fund's bi-annual World Economic Outlook, due to be published on Thursday, had the U.S. economy growing at a sluggish 1.5 percent this year before picking up modestly to 2.5 percent in 2002.
With the world's richest economy slowing faster than most economists had forecast, the IMF has been revising its U.S. growth forecasts lower almost weekly as it prepares to release its WEO report.
In September, its last WEO predictions for this year had the global economy growing by 4.2 percent and U.S. economic growth at 3.2 percent.
As recently as March, a draft of the IMF's next outlook obtained by Reuters revealed that the global lender had expected the world's richest economy to grow by 1.7 percent this year before picking up to a solid 3 percent next year.
Even at that slightly higher level of economic growth, the IMF's chief economist, Michael Mussa, had said he expected the United States to ``skirt the edge of recession.''
While the IMF still does not expect the United States to dip into a full-fledged recession, the latest forecasts highlight how quickly the American economy is slowing.
In a bid to foster growth, the U.S. Federal Reserve (news - web sites) Bank unexpectedly cut interest rates by one-half of a percentage point this week.
Since the start of the year the U.S. central bank has cut interest rates by two full percentage points as a slew of economic data showed the economy to be slowing.
Others Predict Even Sluggish U.S. Growth
While the IMF forecast U.S. growth dramatically below the 3.2 percent expansion predicted in its last publication, others were expecting even more sluggish growth for this year.
In its annual Global Development Finance report on April 10, the World Bank (news - web sites) said the U.S. economy would grow by a paltry 1.2 percent this year.
That 1.2 percent projection was well below the 2.4 percent U.S. growth predicted by the Bush administration in its budget forecast.
The IMF sources said on Saturday their World Economic Outlook would predict global growth this year of 3.2 percent, jumping to a more robust 3.9 percent next year.
Japan's economy was expected to grow by 0.6 percent this year and 1.5 percent the following year.
The closely guarded report also forecast growth of 2.4 percent this year in the countries that make up the euro zone, followed by 2.8 percent in 2002.
Separately, European monetary sources told reporters in Malmo, Sweden, that other institutions also had been busily revising downward their predictions and that with the developed world slowing at a faster pace than many had expected only a few months ago, more downgrades could be in the pipeline.
``A lot of these forecasts had been based on a 'V-shaped' recovery in the U.S. and if that is not delivered, they will obviously have to cut back further,'' one source said.
The sources said the IMF would forecast inflation of 2.3 percent in the euro zone in 2001, falling to 1.7 percent the following year. Euro zone inflation was 2.6 percent in March.
IMF sources in Washington said their research department reserved the right to make last-minute tweaks to the WEO right up until its publication on April 26. |
