U.S. To Escape Recession Says IMF

April 5, 2007
World economy is in sound health.

The U.S will overcome a housing slowdown and avert recession, while the rest of the global economy is in sound health, the International Monetary Fund said April 5. "The message here is reassuring: we do not think the U.S. is heading for recession," the IMF's new chief economist Simon Johnson said.

Johnson acknowledged the housing slowdown underway in the world's largest economy, "but we're not seeing it spread beyond residential construction."

Neighboring Canada and Mexico could feel some effects from the U.S. housing market, "but it won't spill over to the broader global economy," the economist said. "If the U.S. sneezes, you should worry about other parts of the world catching cold. But at the moment, other parts of the world are healthy," he added.

"The U.S. economy has also been taking its vitamins. While there are problems in one important sector and a couple of regions of the U.S., overall the economy is very healthy," he added.

Johnson was speaking at the release of a portion of the IMF's semi-annual World Economic Outlook. The IMF report said also that some of the world's economic imbalances may be corrected as the dollar's value declines. The massive U.S. trade gap -- of $763.6 billion in 2006 -- is among key concerns for finance officials as surpluses and currency reserves mount in countries such as China.

The IMF concluded that "a real U.S. dollar depreciation of less than 10% could bring about a 1% of GDP narrowing in the U.S. trade deficit." The U.S. current account deficit is already looking better, Johnson said. "It looks like that part of the global imbalances has turned the corner."

Copyright Agence France-Presse, 2007

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