The US economy will continue growing this year and avoid a recession despite a lingering housing slump and a related credit crunch, White House economists predicted on Monday.
The annual Economic Report of the President said the world's largest economy had absorbed shocks in the past and that Congress's approval of a giant economic stimulus plan last week would help fire up growth.
"Economic growth is expected to continue in 2008. Most market forecasts suggest a slower pace in the first half of 2008, followed by strengthened growth in the second half of the year," the annual survey said.
It forecasts that US gross GDP would remain at 2.7 percent this year compared with a similar assumption for last year, and sees growth accelerating several notches to 3 percent next year.
The White House projections contrast with forecasts by some private economists, some of whom believe that the world's richest nation is on the cusp of or has already fallen into a recession.
"This report indicates that our economy is structurally sound for the long term and that we're dealing with uncertainties in the short term," President George W. Bush told reporters at the White House as he endorsed the annual assessment.
The White House report, however, cautioned that the troubles roiling the mortgage and credit markets could hamper growth.
"The contraction of the secondary market for some mortgage securities and the ensuing write-downs at major financial intermediaries are a new downside risk," the report cautioned.
White House economists said the downturn in the housing market had not spilled over into the wider economy as of the end of last year.
Bush is due to sign the economic stimulus plan, which is valued at about US$150 billion and includes temporary tax rebates and business incentives, into law today.
"I'm so pleased that the Congress and the administration worked closely together in order to pass a robust pro-growth package to deal with the uncertainties," Bush said. "I'll be signing this bill soon."
Aside from the economic aid package, the report also underlined action taken by the US central bank to give growth a shot in the arm.
"The Federal Reserve provided liquidity and took measures to support financial stability in the financial markets in the wake of the disruptions in the credit markets," the report stated.
US growth slowed to a 0.6 percent annualized crawl in the fourth quarter compared with a blistering 4.9 percent clip in the prior quarter, despite the Fed unleashing a sustained rate-cutting campaign in September.
The central bank has slashed its key federal funds short-term interest rate to 3 percent in recent weeks in a bid to underpin economic momentum.
The White House assessment echoed remarks made by Treasury Secretary Henry Paulson in Tokyo on Saturday.
"I believe that we are going to keep growing. If you are growing, you are not in recession, right? We all know that," Paulson said after a meeting of finance chiefs from the G7.
The report also forecast that inflationary pressures would cool this year with the consumer price index (CPI) moderating to 2.1 percent from an expected 3.9 percent last year.
The CPI is forecast to tick up to 2.2 percent next year.
On the job front, the unemployment rate is anticipated to rise to 4.9 percent this year and hold steady next year, compared with a predicted 4.6 percent for last year.