The United States faces a weakening economic recovery that will keep unemployment high for at least the next two years, the International Monetary Fund (IMF) warned in its latest report on the global economy. After a poor summer that has led some economists to warn of a looming double-dip recession in the United States, the IMF was forced to make a sharp course correction in its forecasts for the world's largest economy, dpa reported. The US is now expected to grow 2.6 per cent this year and 2.3 per cent in 2011, down 0.7 percentage points and 0.6 percentage points from the IMF's last prediction in July. IMF economist Olivier Blanchard said the chances of a second recession remained low, yet the weak growth figures were unlikely to provide a boost to the US labour market. The jobless rate is likely to hover near 10 per cent for the next two years, the IMF said, a prediction that would place serious pressure on US President Barack Obama's administration. A lack of spending by US consumers was proving the biggest drag on the recovery. High debts already before the crisis were causing most US families to save more. This was "good for the long run but it is a drag on demand in the short run," said Blanchard. Yet Obama's policy toolkit for dealing with the crisis is also limited. The IMF warned that the skyrocketing US budget deficit had increased the country's "vulnerability" to the whims of financial markets. "The main challenge of advanced countries is fiscal consolidation," Blanchard said, even if there was "no question" that budget cuts would reduce growth in the near term.
