Nando Times

World: IMF lowers U.S. growth forecast for this year

The Associated Press

TOKYO (January 12, 2001 9:31 a.m. EST http://www.nandotimes.com) - The International Monetary Fund has lowered its 2001 growth forecast for the United States but a top IMF official said Friday the slowdown in the world's largest economy will not derail Asia's recovery.

IMF managing director Horst Koehler said at a news conference that the international lender has cut its economic forecast for the U.S. in 2001 to growth of 2.5 percent from the previous projection of 3.2 percent.

This will have some impact on major exporting nations in Asia, where the region - excluding Japan - is expected to see its economic expansion slowing to 5 percent this year from 8 percent last year, Koehler said.

But he said the projected growth deceleration is a "normalization, rather than a cause for gloom and doom."

The IMF official also was upbeat about the U.S. economy, saying that "on balance, signs still point to a soft landing." While he acknowledged he was surprised by the pace of the drop in U.S. growth in recent months, Koehler said it is necessary to avoid swinging from the "exaggerated optimism of a few months ago to an exaggerated pessimism today."

Koehler is in Japan to attend the third biennial meeting of finance officials from 10 Asian and 15 European nations - known as the Asia-Europe Meeting, or ASEM - over the weekend in Kobe, western Japan.

Koehler called on Japan to "redouble efforts" on restructuring its corporate and financial sectors.

There is "still room for maneuver in macroeconomic policy" if the economy falters, he said, adding that Japan's current fiscal deficit level is appropriate given the frail state of the economy. He said, however, he expected moderate recovery to continue.

Koehler said he is not too worried about the weakening yen. On Friday, the U.S. dollar rose to a new 18-month high against the Japanese currency, climbing briefly to 118.25 yen, its highest level since July 1999. Investors are selling yen, worried that Japan's economic recovery may be stalling.

Koehler said he welcomes the recent strengthening of the euro and weakening in the dollar, though he added such corrections in exchange rate levels need to be orderly.

-- Rachel Gibson (rgibson@hotmail.com), January 12, 2001