Experts see economic boost for next year

By Martin Crutsinger
Associated Press

WASHINGTON — The United States, which struggled through a stop-and-go recovery last year, should see the economy steadily gain strength in 2003, according to a panel of prominent economic forecasters.

But that outlook from the National Association for Business Economics comes with an important caveat — any U.S. war with Iraq ends quickly.

A panel of 37 top economists, who prepared NABE's latest quarterly outlook, said that President Bush's call for a new round of tax cuts would provide a moderate boost to the economy this year and next.

But the forecasters said that an even bigger positive factor would be a quick resolution of the war, which would remove uncertainty that is holding back business investment plans.

"Rising tensions in the Middle East are coloring business decisions and hampering U.S. economic growth," said NABE President Tim O'Neill, the chief economist at BMO Financial Group.

In part because of war worries, the new NABE forecast lowered its growth forecast slightly for all of 2003, saying the gross domestic product would expand 2.7 percent this year, down from a November forecast of 2.8 percent GDP growth.

That would, however, still be an improvement over the 2.4 percent growth turned in during 2002. NABE predicted the pattern of growth would show steady improvement instead of last year's pattern when one quarter of strong growth was followed by a quarter of anemic activity.

The NABE panel projected 2003 growth at rates of 2.7 percent during the current quarter, 3.2 percent in the April-June period, 3.5 percent in the third quarter and 3.8 percent for the final four months of the year.

"The NABE panel's expectation is that resolution of the (Iraq) conflict will combine with stimulative monetary and fiscal policy to create much stronger conditions in the latter half of this year," O'Neill said.

By the second half of the year, the jobless rate will start to come down, O'Neill said.

The NABE panel predicted even better growth of 3.6 percent in 2004 with the unemployment rate dropping from an expected average of 6 percent this year down to 5.5 percent next year, a welcome development for Bush in a year when he would be running for re-election.

A new CBS-New York Times poll said public confidence in the president's ability to handle the economy was at the lowest level since he took office, with just 38 percent approving of his handling of the economy and 53 percent disapproving.

Three out of five said the state of the economy is bad, the lowest measure in this poll in a decade.