News Column

IMF Lowers U.S. 2014 Growth Forecast

July 24, 2014

Washington, Ramadan 26, 1435, Jul 23, 2014, SPA -- The International Monetary Fund (IMF) on Wednesday lowered its U.S. economic growth forecast for 2014 after severe winter weather in the first quarter delivered a sharp contraction.

The IMF said the world's biggest economy should grow 1.7 percent in 2014, below its June prediction of 2 percent growth and its April forecast of 2.8 percent.

"An unusually harsh winter conspired with other factors, including an inventory correction, a still-struggling housing market, and slower external demand" to cause the economy to contract at a 2.9 percent annual rate in the January-March quarter, the IMF said.

While economic activity has rebounded to an annual rate likely above 3 percent, the improvement would not be able to fully offset the first-quarter performance, which was the worst quarterly contraction in five years.

"This means growth for the year as a whole will be a disappointing 1.7 percent," the IMF wrote. But the next year should see stronger growth, accelerating to the fastest annual pace since 2005, the global lender projected.

As long as inflation and financial stability concerns remain subdued, the IMF said the U.S. Federal Reserve (Fed) could keep its benchmark interest rate at zero beyond mid-2015.

The IMF warned that as the U.S. population ages, the economy will not be able to grow above 2 percent in the longer-term without significant reforms, including tax and immigration changes, more investment to infrastructure and job training, and the provision of childcare assistance, which would allow more Americans to join the labor force.

For the first time in several years, the IMF also focused on areas of poverty in the United States, which afflicts one-quarter of American children. It urged the country to expand a tax credit to all poorer workers and increase the minimum wage, which together should help poor people without significantly affecting the government budget.

"We do think [poverty] is macro-relevant, we do think it's important for growth and both economic and social sustainability in the United States," Nigel Chalk, the deputy director of the IMF Western Hemisphere department, told reporters in Washington.


21:20 LOCAL TIME 18:20 GMT

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Source: Saudi Press Agency (Saudi Arabia)

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