Fri, Jul 25, 2014 - Page 15 News List

IMF sees US growth at weakest since recession


US economic growth this year is set to be the weakest since the Great Recession ended, the IMF said, mostly because of a sharp, weather-related contraction in the first quarter.

However, the global lending organization said on Wednesday that it still expected that growth had resumed in the April to June quarter and should remain healthy in the second half of this year and next.

In its annual report on the US economy, the IMF projected growth would be just 1.7 percent this year, down from a 2 percent estimate last month. That is below last year’s 1.9 percent prediction and would be the slowest annual rate since the recession ended in June 2009.

The IMF’s outlook is more pessimistic than that of the US Federal Reserve, which expects growth of at least 2.1 percent. However, it is in line with most other private economists.

The IMF says growth is set to rebound in the April-June quarter to a healthy 3 to 3.5 percent and remain in that range for the rest of the year. It also projects the economy is to expand 3 percent next year, which would be the best showing since 2005.

“Behind that pessimistic number, we do see a relatively optimistic view of the economy going forward,” said Nigel Chalk, deputy director of the IMF’s Western Hemisphere department.

The economy should benefit as government spending cuts and tax increases have slowed compared with last year, the IMF said. Political fights over the budget have also ended, at least for this year. That’s allowed the IMF to focus on longer-term issues facing the US economy.

One of them is poverty. The IMF’s report said “recent growth has not been particularly inclusive” and noted that roughly 50 million US citizens are poor, despite five years of growth and a steady drop in unemployment. The US should boost its minimum wage and expand tax credits for the working poor, the report recommended.

In addition, growth may sink back to 2 percent in the long run, the IMF warned, as the population ages. The US should encourage more Americans to work by providing more childcare assistance, which could reverse recent declines of women in the workforce. Reforms to the government’s disability program could also encourage more part-time work.

The US should also spend more on roads, bridges and other infrastructure to boost productivity, the IMF said.

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