US growth forecast slashed by the IMF

THE IMF has brutally slashed America’s growth forecast for this year to just 1.6 per cent -- down from its last estimate of 2.5 per cent, made just two months ago.

Reports in Italy said that a draft IMF report has also downgraded the forecast for US growth in 2012 from 2.7 per cent to two per cent.

“Due to increasing risks surrounding GDP growth outlook in the US, the Federal Reserve should be ready to launch new non conventional measures to support the economy,” the report recommends.

The Eurozone was also hit by the downgrades, the IMF now expecting the single currency area to expand by 1.9 per cent this year -- 0.1 per cent less than its last forecast.

Next year growth in the euro area will slow to 1.4 per cent, the IMF expects, having previously predicted 1.7 per cent growth.

Italy’s prospects are particularly gloomy, according to the report. The international bailout agency now forecasts growth of just 0.8 per cent in the troubled Mediterranean state and 0.7 per cent next year.

“Should the downside risks remain, the ECB would have room for a further easing of its monetary policy,” it said.