IMF’s Rajan predicts slower US growth

PARIS: The IMF chief economist has predicted slower than expected growth next year in the US, with a ‘dramatic’ slowdown in the housing market, but said global momentum remained ‘very strong.’

“All in all, there is a big uncertainty,” regarding the economic outlook in the United States, said Raghuram Rajan on Wednesday, adding that he expected growth in the American economy in ’07 to be at “2.7% or 2.8%.”

The International Monetary Fund said last month in its twice-yearly World Economic Outlook report that US growth would reach 3.4% this year before easing to 2.9% in ’07.

Rajan added in a meeting in Paris with a small number of journalists that “recent data suggest that the housing market in the US is slowing down very fast” and that the trend was “quite dramatic.”

The extent of the slowing of the US economy is one of the major risks for the global outlook, he said, because the country is such a big part of the world economy.

But “our basic view is that the global growth is very strong and expected to be very strong coming into next year,” he said.

“Japan is in progress, emerging economies are growing very strongly,” said Rajan, adding that the recent decline of oil prices was helpful for the global outlook.

On the Chinese currency he said: “The yuan is undervalued at this point and it gets more undervalued” as time goes on. ‘The question is not whether (the currency should appreciate) but when and how,’ he said.