RPT-UPDATE 1-IMF-US recovering, sees unemployment, housing risks

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WASHINGTON, July 8 (BestGrowthStock) – High unemployment and a
moribund housing market are constraining the U.S. economic
recovery, while the public debt looms large on the horizon and
needs to be addressed, the International Monetary Fund said on
Thursday.

The IMF raised its U.S. growth forecast slightly to 3.3
percent for 2010 and 2.9 percent for 2011, but said
unemployment would remain above 9 percent for both years and
inflation would remain low.

In a statement released after its annual consultations with
U.S. government authorities, the IMF said recovery from
recession had become well established due to a powerful fiscal
and monetary policy response.

“The outlook has improved in tandem with recovery, but
remaining household and financial balance sheet weaknesses —
along with elevated unemployment — are likely to continue to
restrain private spending,” the fund said.
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Reuters Insider coverage of IMF briefing:

http://link.reuters.com/jux36m
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The IMF said the key challenge for the United States was to
develop a credible fiscal strategy to ensure that public debt
was seen to be put on a sustainable path without jeopardizing
the recovery.

The fund forecast U.S. federal debt as a percentage of GDP
would rise from 64 percent in 2010 to 72.4 percent by 2012 and
96.3 percent by 2020. It welcomed commitments by the Obama
administration to stabilize this at just over 70 percent of
gross domestic product by 2015 but called for a downward path
after that, a step that would require both spending cuts and
increased revenues.

It endorsed planned immediate measures to reduce the budget
deficit, but said these should be designed to have the smallest
impact on demand. It also said longer term measures were needed
to address entitlement pressures, such as imbalances in the
Social Security pension system.

It said the biggest contribution the United States could
make to global growth and stability would be to increase its
domestic savings — particularly by reducing deficits — and
said the U.S. could no longer serve as the world’s consumer.
This would require domestic demand growth in exporting
countries, the Fund said.

“With the U.S. dollar now moderately overvalued from a
medium term perspective, this will need to be accompanied by
greater exchange rate flexibility/appreciation elsewhere,” the
IMF added.
(Reporting by David Lawder; Editing by Neil Stempleman)

RPT-UPDATE 1-IMF-US recovering, sees unemployment, housing risks