WASHINGTON: The IMF cut its US growth forecast for 2014 to 2.7 percent on Friday, saying the economy is being held back by “excessively rapid and ill-designed” government spending cuts.
The severe sequester cuts, aimed at closing the US deficit, are already taking up to 1.75 percentage points from this year’s growth potential.
And even though growth will pick up pace in 2014, it will still be less than the 3.0 percent the IMF previously forecast, due to the impact of the sequester, which requires $109 billion to be sliced from spending in the coming fiscal year.
In its annual report on the United States, the International Monetary Fund called on Congress to repeal the sequester, saying that stronger growth in the short term is important both for the US and global economies.
“The automatic spending cuts not only exert a heavy toll on growth in the short term, but the indiscriminate reductions in education, science, and infrastructure spending could also reduce medium-term potential growth,” the IMF said.
The sequester cuts for this year have had one beneficial outcome, cutting the fiscal deficit by a huge 2.5 percent, the Fund said.