The IMF is apparently warning the US about its deficit problems. Perhaps the most incredible thing about this report is that it is a leak of something which is due to appear next month. The time horizon on which we operate and react seems to be reducing continuously:
The US will remain the main engine of growth for the global economy but needs a plan to control its swelling budget deficit, the International Monetary Fund has warned. Leaked drafts of the IMF's twice-yearly world economic outlook, due to be released at its meetings in Dubai next month, show upward revisions to US growth predictions and a downgrading of growth prospects in the eurozone.
The latest figures show the global growth forecast slightly higher than the IMF's previous prediction in April, at 3.2 per cent in 2003 and 4 per cent in 2004. The US forecast has been revised up to 2.4 per cent this year and 3.7 per cent next year, with the eurozone forecast more than halved to 0.5 per cent this year.............The report warns that while fiscal stimulus has helped keep the US and global economy going, there is no strategy for returning public finances to balance in the medium term. "Implementation of a credible medium-term framework to restore broad balance . . . over the cycle is now even more pressing." The report, on which the IMF declined to comment on Wednesday, represents an intensification of the fund's warnings that US tax cuts and public spending will create a structural deficit, ultimately pushing up interest rates and restraining growth.
Source: Financial Times