IMF Warns of Crisis, Cuts US Growth Forecast
Friday, June 17, 2021 11:22 AM

The International Monetary Fund said Friday that it has cut US economic growth forecast and warned the US government and other debt-ridden European countries of future crisis, unless they take immediate steps to reduce their budget deficit.

The IMF said in its regular assessment of global growth economic prospects that bigger threats to growth had emerged since its previous report in April, citing the euro zone debt crisis and signs of overheating in emerging market economies.

The IMF forecast that the US gross domestic product (GDP) to grow at 2.5 percent this year and 2.7 percent in 2012. In its earlier forecast, about two months ago, it had forecasted 2.8 percent and 2.9 percent growth in GDP, respectively.

In the United States, the political problems include a fight over raising the debt ceiling, triggering fears that the world's biggest economy could default. On the other hand, Greece has edged closer to default as euro zone officials disagree on a possible second aid package for the indebted country.

"You cannot afford to have a world economy where these important decisions are postponed because you're really playing with fire," said Jose Vinals, director of the IMF's monetary and capital markets department. “We have now entered very clearly into a new phase of the (global) crisis, which is, I would say, the political phase of the crisis.”

He also added, "If you make a list of the countries in the world that have the biggest homework in restoring their public finances to a reasonable situation in terms of debt levels, you find four countries: Greece, Ireland, Japan and the United States.”