U.S. economic growth will slow to 1.7 percent in 2008 from last year's 2.2 percent pace but will not slide into a recession, the Congressional Budget Office (CBO) forecast Wednesday in a report.
"Although recent data suggest that the probability of a recession in 2008 has increased, CBO does not expect the slowdown in economic growth to be large enough to register as a recession," the CBO said in its report for budget and economic outlook.
For 2009, the CBO forecasts that the economic growth will rebound to 2.8 percent.
Problems in the housing and financial markets, along with high oil prices, triggered much of the recent slowdown, it said. Between mid-2006 and the end of 2007, residential investment declined, but the drop was largely offset by growth in both consumer spending and business fixed investment.
"Those two sectors are unlikely to provide as much support to economic growth this year," it noted.
Residential investment is expected to continue to decline through much of 2008, it said.
And the growth of consumer spending, sustained thus far by solid growth in people's real income as well as by their borrowing and use of savings, is likely fall off, curtailed by a drop in housing wealth, increased costs for borrowing, the high price of oil, and slower growth of real income.
"The resulting weak domestic demand for goods and services in turn is expected to slow the growth of business fixed investment, which is likely to further diminish the pace of overall economic growth this year," it said.
In contrast, the relative economic strength of major U.S. trading partners, when combined with the dollar's decline, will partially offset the sluggishness in domestic demand expected in 2008 and support U.S. economic growth by stimulating exports, said the CBO.
The CBO also projected that inflation is likely to be about the same in 2008 as last year and will fall to 1.8 percent in 2009 as energy and food prices ease.
The unemployment rate, which was 4.6 percent last year, will average 5.1 percent in 2008 and reach 5.3 percent by the end of the year, the CBO estimated.
For 2010 to 2018, the CBO projects that economic growth will average 2.7 percent.
Source:Xinhua
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