U.S. GDP to grow 2% by 2014: IMF
The U.S. economy will need another five years to get its annual growth rate back to two per cent, according to a study released by the International Monetary Fund Friday.
The IMF said U.S. will face constraints in paying for productivity-enhancing capital equipment for the next couple of years.
As a result, the once-fire-breathing U.S. economy will post potential GDP economic growth more characteristic of less dynamic countries for the next few years.
It will take until 2014 for America's potential GDP growth rate to touch the two per cent plateau, the IMF said.
"The protracted recession and tighter financial conditions will hurt investment and, thus capital accumulation, and the resulting high and more-persistent-than-usual unemployment rates will affect equilibrium rates of unemployment — both lowering potential growth," the IMF said.
Potential GDP growth in the U.S. will slip to 0.9 per cent in 2010 and will rise slowly to touch two per cent in 2014, the think tank predicts.
| U.S. GDP growth | (%) | |
| 2009 | 1.4 | |
| 2010 | 0.9 | |
| 2011 | 1.2 | |
| 2012 | 1.6 | |
| 2013 | 1.9 | |
| 2014 | 2.0 | |
| Source: International Monetary Fund | ||
The IMF does report growth rates for each of the next six years. But, the Washington-based organization's model does not predict economic conditions for individual years in the way a bank or investment house might.
Instead, the IMF study estimates U.S. GDP growth as if external financial conditions remain relatively stable.
Thus, for the 2009 to 2014 period, the United States will expand on average by 1.5 per cent.
That rate would be far slower than previous periods, such as 2004 to 2008 when the American economy expanded by 2.4 per cent.
The IMF figured one big problem is that U.S. business will be constrained by the ongoing global credit crunch and won't invest in new equipment to the degree firms did in prior years.
The report estimated that, between 2010 and 2014, the American economy would accumulate new capital stock at an average clip of 2.08 per cent.
That rate would be much slower than the rate of 3.6 per cent at which U.S. firms added new equipment between 2004 and 2008, the IMF said.
Economists often link the rate at which an economy accumulates capital equipment to its productivity and, ultimately, its GDP growth.