The International Monetary Fund (IMF) is planning to cut its U.S. growth forecast for this year due to higher taxes and spending cuts, Italian news agency ANSA said, citing a draft of the IMF’s next World Economic Outlook report.
The U.S. economy, the world’s biggest, will expand 1.7 percent this year, down from the 2.0 percent predicted in January, ANSA reported late on Saturday. The next round of IMF forecasts is scheduled to be published in mid-April.
Higher tax rates for wealthy Americans and $85 billion in government spending cuts known as the “sequester” are slowing growth this year, but the U.S. economy will still expand 3 percent in 2014 as previously forecast, the draft report said, according to ANSA.
The world economy will expand 3.4 percent in 2013, down from a previous forecast of 3.5 percent, and Japan will grow 1.5 percent, up from 1.2 percent previously, the report said.
In 2014, Japan will expand 1.1 percent compared with 0.7 percent previously, and the UK will grow by 1.8 percent, down from 1.9 percent in the last forecast, it added.
Forecasts for the main euro zone countries and for the euro zone as a whole were unchanged from January, according to the report, which cited Italian political uncertainty and tighter fiscal policy in the United States as risks to growth.
Italian elections held a month ago gave no single group a working majority in parliament, leaving the euro zone’s third-largest economy in limbo as the bank crisis in Cyprus renews fears of an outbreak of market turmoil in the currency bloc.
The global economy is facing “new risks and old perils persist,” the IMF draft report said, according to ANSA, adding: “in the short term key risks are related to developments in the euro zone, including the uncertainty tied to the results of the Italian elections, and to budget policy in the U.S.”
An IMF spokeswoman declined to comment.