IMF warns of contagion threat to the US economy
HIGH unemployment and a moribund housing market have increased risks to the US economic recovery, while the public debt looms large and needs to be cut, the International Monetary Fund said yesterday.
In a statement after annual consultations with US authorities, the IMF raised its US growth forecasts slightly to 3.3 per cent for 2010 and 2.9 per cent for 2011, but said unemployment would remain above nine per cent for both years.
The lofty jobless rate, coupled with a large backlog of home foreclosures and high levels of negative home equity, posed risks of a “double dip” in the housing market, it said. But the IMF said it did not think a renewed recession was likely.
“The outlook has improved in tandem with recovery, but remaining household and financial balance sheet weaknesses — along with unemployment — are likely to continue to restrain private spending,” it said.