Tags: imf | us | fiscal | cliff

IMF Urges US to Remove 'Fiscal Cliff' Uncertainty

Tuesday, 03 July 2012 10:39 AM

The International Monetary Fund on Tuesday urged the United States to quickly remove the uncertainty over the path of fiscal policy, which is set to tighten abruptly at the start of next year without congressional action.

The U.S. economy is facing a so-called "fiscal cliff" of $4 trillion in tax hikes and automatic government spending cuts that are due to kick in at the end of the year unless lawmakers act to delay or offset them.

"It is critical to remove the uncertainty created by the 'fiscal cliff' as well as promptly raise the debt ceiling, pursuing a pace of deficit reduction that does not sap the economic recovery," the IMF said in its annual health check of the U.S. economy.

The United States is expected to reach the $16.4 trillion statutory limit on its debt sometime between the November presidential elections and the end of the year. If Congress fails to raise it, it would lead to a U.S. default.

The IMF warned that the "tepid" U.S. recovery would be under threat if Congress failed to reach an agreement on tax cuts and spending policies.

The Fund also said the U.S. economy was vulnerable to spillover effects from the eurozone debt crisis, especially if conditions in Europe deteriorated further.

The Fund forecast economic growth in the United States would reach 2 percent this year and cut its projections for 2013 to 2.25 percent from 2.4 percent.

© 2021 Thomson/Reuters. All rights reserved.

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Tuesday, 03 July 2012 10:39 AM
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