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IMF Expects U.S. Growth to Accelerate in 2014

July 26, 2013
eurodollar

US economic growth is likely to gather strength in 2014, reaching 2.7 per cent despite the lingering impact of government austerity measures, the International Monetary Fund said Friday.

The United States has outpaced other advanced economies in recent years, growing at 1.8 per cent in 2011, 2.2 per cent in 2012, and is expected to expand at 1.7 per cent this year, according to the Washington-based organization.

By comparison, the eurozone contracted by 0.6 per cent in 2012 and is projected by the IMF to shrink at the same rate this year before escaping recession in 2014 with growth of 0.9 per cent.

The US growth comes despite the imposition of austerity measures in January, including slashed spending and the expiration of some tax cuts. The IMF executive board called the measures "excessively rapid."

The federal deficit as a percentage of gross domestic product declined from 9 per cent in 2011 to 6.9 per cent in 2012 and is slated to drop to 4.6 per cent this year. For 2014, the IMF projects the US deficit at 3.4 per cent.

"Despite the powerful headwinds, the nature of the recovery appears to be changing," the IMF said in a statement of its findings from an annual review of the US economy, noting a soaring stock market, recovering housing sector, modest improvements in hiring and reduced household debt.

"To a large extent this owes to very easy financial conditions."

The Federal Reserve has said it will keep interest rates near zero for an extended period to support job growth, while continuing to infuse cash into money markets to support private investment.

The IMF executive board said that the lax monetary policy "continues to provide essential support to the recovery" but warned of risks to financial stability caused by the possibility of speculative bubbles.





Source: Copyright 2013 dpa Deutsche Presse-Agentur GmbH


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