International Monetary Fund Slashes U.S. Growth Prospects

By Xyla Joelle L. Fernandez

Oct 06, 2016 06:00 AM EDT

The International Monetary Fund is downgrading its forecast for the U.S. economy this year because business investment has proved weaker than expected. The IMF cut its estimate for U.S. economic growth in 2016 to 1.6 percent from the 2.2 percent it had predicted, July. 

Behind the slump in U.S. business investment, the IMF says, are cutbacks in the energy industry, a strong dollar that is depressing exports and "policy uncertainty'' related to the November elections. 

The IMF says sluggishness in the United States has been offset by improving prospects among developing economies. It left unchanged its forecast for overall global growth this year at 3.1 percenThe IMF (International Monetary Fund) said that they are lowering the forecast for U.S growth this year. This was announced last Tuesday and said that the downgrade is casting a shadow on the outlook for performance among the world's advanced economies.

It is the biggest decline for a developed nation and is driven by unexpectedly weak business investment and slim inventories.

The IMF expects that America's output will expand by a tepid 1.6 percent, more than half percentage point less that forecast in July.

"The world is moving sideways. Without determined policy action to support economic activity over the short and longer terms, sub-par growth at recent levels risks perpetuating itself-through the negative economic and political forces it is unleashing" ", IMF Chief Economist Maury Obstfeld said. 

The IMF also had warned that the so-called Brexit  could depress growth in the United Kingdom for years. British  growth forecast increased by 0.1 percent points to 1.8 percent which is better than the United States-a the worst scenarios failed to materialize.

As both presidential candidates have opposed an expansive new trade deal known as the Trans Pacific Partnership. Republican nominee Donald Trump, has criticized long term standing trade deal such as NAFTA and called for steep on goods from China and Mexico.

The result in some richer countries has been a political movement that blames globalization for all woes and seeks somehow to wall off the economy from global trends rather than engage with cooperatively foreign nations," Obstfeld  furthered.

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