IMF Cuts U.S. Growth Forecast to 2.5% - BloombergThe International Monetary Fund cut its forecast for U.S. growth in 2011 for the second time in two months, warning that further setbacks to a recovery pose growing threats to the world economy, along with potential contagion from the European debt crisis.
The IMF's World Economic Outlook Update also discussed the need for credible fiscal consolidation in the U.S. that would include revenue increases and entitlement reforms, as well as the immediate need to increase the U.S. debt ceiling.
Relevant excerpts follow:
Fiscal challenges continue to pose various risks for the recovery. A first set of concerns revolves around fiscal imbalances in the euro area periphery. A second set involves the large near-term fiscal adjustment in the United States against a still-fragile recovery. A third set of concerns centers on medium-term fiscal sustainability in the United States and Japan. In the United States, these risks are rising because of the absence of credible consolidation and reform plans...
The key fiscal priority for major advanced economies--especially the United States and Japan--is to implement credible and well-paced consolidation programs focused on bolstering medium-term debt sustainability... For the United States, it is critical to immediately address the debt ceiling and launch a deficit reduction plan that includes entitlement reform and revenue-raising tax reform. Should the recovery threaten to turn out substantially weaker than currently projected, the pace of fiscal adjustment should be modified accordingly, within the envelope of a credible medium-term consolidation plan.