IMF forecasts slower growth, no recession
USA Today
WASHINGTON — There will be no American recession and, despite glacial growth in the United States and Japan, the global economy will skirt recession, too, according to the International Monetary Fund's semi-annual World Economic Outlook released yesterday.
The group sees U.S. growth slowing to 1.5 percent this year, slashing its September forecast by 1.7 percentage points. The world economy will grow 3.2 percent, the report said.
"We are clearly looking at a substantial and broadly distributed world slowdown," said IMF economist Michael Mussa, "but not a recession."
The IMF said prospects for global growth had "weakened significantly" since its last forecast in September, led by a "marked slowdown" in the United States and a "stalling recovery" in Japan.
If the IMF's 1.5 percent growth forecast is correct, the U.S. economy would be on track to grow at its slowest pace in a decade. The IMF sees slow growth through the third quarter with a pickup toward year's end.
The IMF applauded the U.S. Federal Reserve's decision to cut short-term interest rates by two percentage points since the beginning of the year. It also endorsed the Bush administration's tax-cut plan, saying that together with more interest rate cuts, tax relief might be enough to bolster the U.S. expansion.
The European Central Bank, which decided to leave interest rates unchanged at 4.75 percent yesterday, needs to follow the Fed's lead, Mussa said.
