IMF: 'Below-Potential' U.S. Economic Growth, But No Recession

International Monetary Fund is expected to lower its forecasts for U.S. and global growth for 2008 when it releases its updated estimates next week.

WASHINGTON (Dow Jones/AP) — The U.S. economy will likely experience ''below-potential'' economic growth this year, but the International Monetary Fund still doesn't anticipate a recession, a spokesman said Thursday.
''We still see a period of below-potential growth as the most likely scenario for the U.S., given the economy's good starting position,'' IMF Director of External Affairs Masood Ahmed said at a regular press briefing.
Strong corporate profits and balance sheets, as well as solid macroeconomic policies, put the U.S. in a good position when the subprime crisis struck at the end of the summer, he said, adding that risks remain to the downside.
The IMF is expected to lower its forecasts for U.S. and global growth for 2008 when it releases its updated estimates next week. The new figures were scheduled for release Friday, but have been delayed to take into account recent major developments in markets and in policies, Ahmed said.
Ahmed declined to comment about discussions under way between the White House and Congress on economic stimulus efforts, except to say that targeted and timely measures would be helpful.
The IMF also welcomes recent investments by sovereign wealth funds in major banks, since they have helped contain the impact of the banks' losses on credit markets and maintained banks' ability to lend, he said.
Investments by the government-owned funds, into banks including Merrill Lynch & Co., Morgan Stanley and Citigroup Inc., are a ''good indication of the fact that a number of these banks that had been affected by the financial market crisis in terms of losses are actively engaged in restructuring their balance sheets,'' said Ahmed.
The emergence of sovereign wealth funds as major players in the investment world has stoked concerns about their general lack of transparency and the potential for strategies based on politics and not just economics.
The IMF has taken up a call by the Group of Seven leading industrial nations to help come up with a set of best practices for the funds, and Ahmed said the institution has held discussions with a number of them.
''We hope that the development of best practices, through the participation of these funds, will help to allay some of the concerns,'' he said, noting that countries who operate such funds are also worried about protectionist sentiment
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