US At Odds With IMF's 'Unduly Pessimistic' Outlook

Source : The Straits Times, Apr 10, 2008

WASHINGTON - THE United States and IMF are at odds over the global economic outlook, with a top US official arguing the organisation's projections are 'unduly pessimistic.' Treasury Under Secretary for International Affairs David McCormick told journalists that President George W. Bush's administration does not share the view expressed in the IMF semiannual World Economic Outlook (WEO).

'We remain positive about the long-term resilience of the global economy, as well as the long-term resilience of the US economy, and we believe that the IMF's latest WEO projections are unduly pessimistic,' Mr McCormick said.

The IMF on Tuesday cut growth projections for virtually every major economy, and for the US projected 0.5 per cent growth in 2008, with a 'mild recession' this year, followed by a slow recovery that will drag on growth into 2009.

The IMF cut growth for Japan, the eurozone and Britain and slashed its global growth forecast to 3.7 per cent.

Mr McCormick did not offer any more specific growth numbers but said the US believes the IMF projections are 'significantly below consensus.' He also said the administration hopes a faster recovery in 2008 and a 'steeper growth curve' in 2009.

He declined to say whether the administration sees a recession or not at any point this year.

'I don't think it matters what you call it right now, or the degree to which the actual definition (of recession) holds true,' he said. 'I think the US is suffering through a significant downturn in its growth.' Mr McCormick acknowledged problems in the US and elsewhere but said the outlook was not as grim as portrayed by the IMF.

'As you know, the global economy was exceptionally strong the last four years, averaging nearly five per cent growth annually,' he said.

'It was perhaps inevitable that some slowdown would occur but the financial headwinds and other adjustments underway pose significant challenges to the outlook for 2008,' he said.

He added that while there are still 'significant downside risks to the outlook,' the US has taken many steps aimed at mitigating these risks.

These include the pending economic stimulus tax-rebate checks and efforts to coordinate the lending industry's response to a wave of foreclosure threats that could drive the housing market down even further.

He said Treasury Secretary Henry Paulson would deliver the message to his counterparts at Friday's meeting of G7 finance ministers.

'Secretary Paulson will tell them that the housing correction, financial market turmoil, and high energy prices are weighing on US economic growth,' Mr McCormick said.

'Since last August, markets have been re-pricing and reassessing risk and there will be more bumps in the road.' -- AFP