IMF Sharply Downgrades U.S. Economic Outlook

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The International Monetary Fund has sharply downgraded its outlook for the U.S. economy through 2012 because of weak growth and concern that Europe won't be able to solve its debt crisis.

The international lending organization expects the U.S. economy to grow just 1.5 percent this year and 1.8 percent in 2012. That's down from its June forecast of 2.5 percent in 2011 and 2.7 percent next year.

The IMF has also lowered its outlook for the 17 countries that use the euro. It predicts 1.6 percent growth this year and 1.1 percent next year, down from its June projections of 2 percent and 1.7 percent, respectively.

The gloomier forecast for Europe is based on worries that Greece will default on its debt and destabilize the region.

"Fear of the unknown is high," said Olivier Blanchard, the IMF's chief economist. "Strong policies are urgently needed to improve the outlook and reduce the risks."

Overall, the IMF predicts global growth of 4 percent for both years. Stronger growth in China, India, Brazil and other developing countries should offset weaker output in the United States and Europe.

The U.S. economy grew at an annual rate of just 0.7 percent in the first six months of the year. And the U.S. unemployment rate has stayed above 9 percent for all but two months since the recession officially ended two years ago.

Financial turmoil and slow growth are feeding on each other in both the United States and Europe, IMF officials say. Europe's debt crisis is causing banks to reduce lending and hold onto cash. Sharp stock market drops in the United States over the summer have hurt consumer and business confidence and will likely reduce spending. That slows growth, which leads many investors to shift money out of stocks and into safer investments, such as Treasury bonds. In Europe, slower growth will make it harder for stressed nations to get their debt under control.

U.S. and European policymakers need to act more decisively to cut budget deficits, the IMF said. And European officials need to ensure that the region's banks have enough capital to withstand the debt crisis.

The IMF said in its report that the U.S. economy faces longer-lasting problems that go beyond high gas prices and disruptions caused by the Japan crisis.

Employers are adding few jobs and giving out meager pay raises. Many homeowners owe more on their mortgages than their homes are worth. Banks are keeping credit tight.

All those trends are holding back consumer spending. Unemployment is likely to average 9 percent next year, the IMF's report said, echoing a recent estimate by the Obama administration.

President Barack Obama's proposal to cut taxes and spend more on infrastructure should provide much-needed short-term stimulus, the IMF said. But it needs to be paired with a longer-term plan to reduce the deficit over, the report said. The timing of the budget cuts is key, Blanchard said.

Budget cuts "cannot be too fast or it will kill growth," Blanchard said in a statement. "It cannot be too slow or it will kill credibility."

The 187-member nation fund conducts economic analysis and lends money to countries in financial distress. It will hold its annual meetings with the World Bank later this week in Washington.

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mikcl1

The IMF is FOS, they cant even keep thier own house in order thier opinion is meaningless.

September 21 2011 at 8:24 AM Report abuse rate up rate down Reply
monza866

Obamafree is what we have to be.

September 21 2011 at 7:59 AM Report abuse +1 rate up rate down Reply
1 reply to monza866's comment
wjn25624

you forget who put us here , the corporate socialists the repubs .fox news wouldnt tell you that right IDIOT the misinformed!

September 21 2011 at 8:22 AM Report abuse rate up rate down Reply
2 replies to wjn25624's comment
Mickylitz

wjn25624

Although I disagree with the amount of debts the bush aministration accumulated over the 8 years of power bush had help with the democrat controlled congress however it pales compared to the amount of debts our country find itself in under the obama administration.
The Bush administration added Almost 5 trillions to the debt in 8 years.

01/22/2001 ......................................... 5,728,195,796,181.57

01/20/2009 ......................................... 10,626,877,048,913.08

Obama 's performance in 2 1/2 years....

01/20/2009 ............................................................10,626,877,048,913.08

09/19/2011 ............................................................14,729,488,947,751.89

The obama administration added 4 trillions + in 2 1/2 years, at this rate can you even imagine what our public debt will be if this no good president and croonies stay in power for 8 years,,, Try to be honest with yourself if you can count..

September 21 2011 at 9:24 AM Report abuse +2 rate up rate down
warrenbent

As the old saying goes, "Bush spent like a drunken sailor, while Obama has been an embarrassment to drunken sailors everywhere"

Hope and change!

September 21 2011 at 9:27 AM Report abuse +2 rate up rate down
brownfocus

Hope & Change=DOWNGRADE

September 21 2011 at 7:49 AM Report abuse +2 rate up rate down Reply
Doubledaddy

If the Liberals in Washington continue re-distributing the wealth, subsidizing failing companies and printing money we will be competing with Haiti as a World leader by 2013 or even sooner.My opinion!

September 21 2011 at 6:44 AM Report abuse +3 rate up rate down Reply
2 replies to Doubledaddy's comment
Mickylitz

James..
I couldn't agree with you more, the more we keep the democrats in power the sooner we wil hit rock bottom, we also have to rid ourselves of the Rinos contributing to America's demise...
Obama keeps on saying that we have to live within our means while in the same token he squanders our money on eveything and anything to try to make himself look good...
They are many area where we could cut spending, every government agencies have an overblown budget to begin with encouraging them to waste more money just because the stupid laws telling them to spend it or lose it, how dumber can this government get ?
Let's start the cuts with foreign aid, welfare, the EPA, FDA, USDA, OSHA, NLRB, HHS, HUD, DOE and all of those unecessary stupid research designed to blow smoke up your a&&........................

September 21 2011 at 8:05 AM Report abuse +2 rate up rate down Reply
clarkkentdlyplnt

Liberals, liberals ,liberals, Polly wanna cracker? This mess belongs to Wall Street. The i d i o t s on Wall St. substituted all the principals of sound business for high stakes gambling. Giddy with dreams of being the next Lords and Ladies of the Monetary Aristocracy, they crashed our economy and now were being sold down the river to recoupe their losses. The banking industry is flush with our money but they hold it like it was the last shekel on earth

September 21 2011 at 8:09 AM Report abuse rate up rate down Reply
2 replies to clarkkentdlyplnt's comment
warrenbent

clark, more failed social engineering from the mouth-breathers in Foggy Bottom crashed the economy.

For decades we heard of the glory of "affordable housing" from these knuckle-dragging goons. FHA, Fannie, Freddie, Community Re(mal)Investment Act, etc, etc, etc,

Then as soon as affordable housing actually arrives, the goons look for a scapegaot upon whom they can lay blame for their own hubris. Sadly, their target hits home among the bleating members of their flock like yourself.

September 21 2011 at 8:26 AM Report abuse +1 rate up rate down
Mickylitz

You obviously haven't seen the light yet and from the tone of your post you probably never will, you're the type of person who will stand by the Democrats come hell or high water regardless if it means destroying our country in the process.
I am and always have been on the conservative side but I refuse to stand by the rinos conspiring to hurt our country, it comes a time to face reality and if the people we elected are more dedicated to their own interest than they are to the welfare of our land it's time to send them packing and also hold them responsible for their actions while they were SERVING (let me use the term lightly ).
Regardless of party we need people with integrity directing our Government if we are to ever see America regain the wonderful status of the past.

September 21 2011 at 8:41 AM Report abuse +2 rate up rate down
Bill

The U.S. economy grew at an annual rate of just 0.7 percent in the first six months of the year. And the U.S. unemployment rate has stayed above 9 percent for all but two months since the recession officially ended two years ago

What they don't tell us is that we are already in a double-dip recession.

September 21 2011 at 6:41 AM Report abuse +3 rate up rate down Reply
rforeverfree

This the real threat to America. Fueled by an administration that hasn't got a clue about economics other than tax and spend.

September 21 2011 at 6:38 AM Report abuse +1 rate up rate down Reply
aklane85

Drive every corporation off shore to a foreign country. Have Boeing call China for a place to put its next factory production expansion. Tax the rich until they stop spending money for anything except food. Keep spending money the govt doesn't have. Then we can take stock in where the country is and not where we think it is going.

September 21 2011 at 6:26 AM Report abuse +2 rate up rate down Reply
1 reply to aklane85's comment
Mickylitz

Boeing should set up shop in SC as they wanted to do but this administration with the help of the Unions are doing everything possible to block it, how is this manoueuver help the job market and the people who needs work ?

September 21 2011 at 7:51 AM Report abuse +2 rate up rate down Reply
Jim

Want to fix the economy and put Americans back to work? Buy only products made in America by companies owned by Americans and refuse to do business with companies that ship jobs overseas and hide money in foreigh banks. And someone could get rich if they would produce a catalog to assist Americans to meet these objectives.

September 21 2011 at 6:03 AM Report abuse -2 rate up rate down Reply
3 replies to Jim's comment
bking555

When all chaos breaks out just remember the Politicians and Banksters who raped Americans of thier homes, saving, retirements and lives !! Street justice will prevail !

September 21 2011 at 5:43 AM Report abuse -3 rate up rate down Reply
Doug

The Great Depression II is just around the corner. Get your finances in order, and get ready for poverty like we see in films of the Great Depression. There are no new jobs in the US. I dread having WWIII to get the economy going.

September 21 2011 at 5:19 AM Report abuse +1 rate up rate down Reply