IMF on US economic growth

CNC report from Washington
Added On July 28, 2013

The International Monetary Fund says that the growth of the U.S. economy will remain tepid through 2013.

In its annual report, the IMF forecasts the U.S. economic growth will be 1.7 percent this year.

The IMF says the U.S. economic recovery remains modest but is gaining ground.

It's supported by a rebound in the housing and stock markets.

SOUNDBITE (ENGLISH): ROBERTO CARDARELLI, Mission Chief to the US, IMF
"There are signs that the U.S. economy is finally moving in the right direction. Stock prices have soared. And house prices especially have been increasing, and that's essential for the U.S. families, for American families, to rebuild their wealth and to spend more, which, of course, is going to be very important for a stronger pace of job creation going forward."

The report predicts the "fiscal policy will be a significant drag on growth in 2013, but less so in 2014".

It says the monetary policy will remain accommodative as the U.S. Federal Reserve's bond purchase program may continue at the current pace.

According to the IMF, "risks to the outlook are still tilted to the downside, although less so than last year."

The fund notes the drag from fiscal policy could turn out to be greater than expected and a worsening of the euro area debt crisis would weigh on  U.S. growth.

It cautions that initial steps taken by the U.S. central bank could result in an abrupt increase in the longer-term interest rates.

SOUNDBITE (ENGLISH): ROBERTO CARDARELLI, Mission Chief to the US, IMF
"We share the authorities' view that the normalization of monetary policy condition should be attuned to the progress in the recovery and especially to the progress in labor markets."

The IMF stresses the fiscal consolidation should be more balanced and gradual.

And automatic spending cuts "should be replaced with back-loaded entitlement savings and new revenues".

SOUNDBITE (ENGLISH): ROBERTO CARDARELLI, Mission Chief to the US, IMF
"We think that the reduction of fiscal deficit this year has been too fast, especially through the implementation of the so-called sequester or the automatic spending cuts that we think will be felt on the economy especially this fall."