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IMF: US growth prospects drop, but deficit reduction must go slow
Jun 29, 2011, 15:13 GMT
Washington - The International Monetary Fund Wednesday downgraded its expectations for the US economy, while warning Washington against a too-rapid deficit reduction.
The IMF said the US economy would likely grow only 2.5 per cent in 2011, 0.3 percentage points less than April projections. For 2012, US growth would likely be 2.75 per cent, 0.2 percentage points less than previously expected.
The aim of the US government to reduce its deficit from 11 per cent of gross domestic product to 4.6 per cent by 2013 appeared to be too ambitious, the IMF said. Instead, Washington should spread the reductions over a longer period of time so as not to endanger the limping economic recovery.
The IMF noted the continuing decline in home prices and the high unemployment in the US, which have restrained consumer spending that makes up 70 per cent of the US economy.
On the brighter side, the IMF noted that the US export market had made a comeback, which improved the financial markets.
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