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April 13, 2005

"IMF Takes Rich Nations to Task," Andrew Balls, _Financial Times_

"IMF Takes Rich Nations to Task," Andrew Balls, Financial Times


The [IMF] forecasts that the US current account deficit will grow slightly to 5.8 per cent of gross domestic product this year, with little improvement thereafter. Germany and Japan are both forecast to have surpluses close to 31/2 per cent of GDP. “The US external deficit has so far been financed relatively easily, aided by continued financial globalisation,” the report said. “However, the demand for US assets is not unlimited... a continuing sharp rise in US net external liabilities will carry increasing risks.” As well as the possibility of a disorderly decline in the dollar, the fund identifed the possibility that inflation pressures lead to a spike in US interest rates, and the high and volatile oil price as key risks to the global outlook. The Bush administration's pledge to halve the US fiscal deficit is not credible, owing to a number of items left out of the budget arithmetic, and “insufficiently ambitious” in any case, the report said....

Posted by DeLong at April 13, 2005 08:33 PM