IMF concerned for U.S. economy
Associated Press
WASHINGTON — The International Monetary Fund said yesterday that the U.S. economy faces higher than usual uncertainty and that chances for a recovery depend on continued productivity gains by businesses.
In its annual snapshot of the U.S. economy, the IMF again warned that the $28.3 billion U.S. trade deficit poses a significant threat to the stability of the dollar.
The review did not make any projection of economic growth for the rest of 2001, noting only that growth so far was running at 1.5 percent compared with 4 percent in 2000.
"Whether economic activity picks up in the second half of 2001 or remains sluggish for an extended period" depends on a number of factors, the report said.
These include "how consumer and business confidence evolve and affect spending and whether the rapid rate of underlying productivity growth seen in the second half of the 1990s is sustained."
IMF directors said they welcomed the interest-rate cuts ordered by the Federal Reserve as well as reductions in personal income tax rates.
However, the report said, "a few directors warned that the authorities should remain vigilant in monitoring inflation prospects. Whether further easing will be needed will depend on the economy's response to past interest rate cuts, with additional cuts needed if economic and financial indicators remain weak."
The productivity boom of recent years boosted increased return on capital and attracted substantial foreign investment, the IMF said. Continuing gains will be crucial to maintaining sufficient confidence in the U.S. economy and preventing a sharp slide in the value of the dollar.
"Although evidence suggests a reasonably favorable outlook for underlying productivity growth — reflecting continued gains in technological innovation and in the adoption and diffusion of technology — directors cautioned that less optimistic productivity prospects could trigger a less favorable outcome and pose a significant challenge" for U.S. policy-makers, the IMF said.
