US growth stalled and problems likely to be protracted, IMF chief economist says
VOICEOVER: The International Monetary Fund, in a world economic outlook released on Wednesday, slashed growth projections for the United States and the global economy as a whole.
SIMON JOHNSON, CHIEF ECONOMIST, INTERNATIONAL MONETARY FUND: In the United States, economic growth has nearly stalled. Against the backdrop of weak financial market confidence, we expect consumption to remain sluggish in the coming quarters due to deteriorating labor market conditions, slow growth in disposable incomes, higher energy costs, and tighter constraints on household borrowing. Notwithstanding aggressive easing by the Federal Reserve and a timely fiscal stimulus package, significant strains in housing and credit markets are likely to be protracted. We now expect global growth will slow to 3.7 percent in 2008. That is half a percentage point lower than our January quarterly update forecast, and well below the 4.9 percent growth seen in 2007.
VOICEOVER: The outlook predicted the US will suffer a mild recession in 2008, and it won’t fare much better in 2009, despite the Federal Reserve’s measures to avert a financial meltdown.
JOHNSON: While the improvement in the US current account is helping to address global imbalances and we think the dollar adjustment remains orderly, we are concerned by the uneven pattern of exchange rate movement around the world. Some large-surplus countries have experienced appreciation in their real effective exchange rates over the past twelve months, but large current account surpluses still need to be addressed, and the framework established just over a year ago by the Multilateral Consultation remains irrelevant.
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