The White House on Monday lowered its forecast for economic growth this year and next and said unemployment is likely to rise as housing and financial debacles along with high energy prices bite.
Under the administration of US President George W. Bush new forecasts, GDP is estimated to grow by only 1.6 percent this year. That’s down from a 2.7 percent growth projection made in February.
Growth next year is expected to clock in at 2.2 percent, also lower than the 3 percent growth rate previously estimated by the White House’s budget office.
“The US economy has continued to expand, but growth has slowed as a result of the sharp housing decline, disruptions in financial markets and high energy prices,” the administration said.
With economic growth slowing, the unemployment rate is projected to move up to 5.3 percent this year and to 5.6 percent next year. The administration’s old forecast called for the jobless rate to climb to 4.9 percent this year and next.
“Because of the recent slower economic growth, the labor market is likely to remain sluggish for a period of time before returning to better performance,” the White House budget office said.
The administration believes the jobless rate will drop back to 5.3 percent in 2010 and continue to dip in subsequent years, falling to 4.8 percent in 2012 and 2013.
On the inflation front, consumer prices are now expected to rise by 3.8 percent this year, up from the administration’s old forecast for a 2.7 percent rise. Prices should calm down a bit next year, rising by 2.3 percent. Still, that’s also higher than the old forecast of a 2.1 percent rise.
“Inflation has increased in recent years, in large part because of surging food and energy prices,” the administration said. Oil prices, which had spiked to a record high of more than US$146 a barrel, are now hovering around US$124 a barrel.
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