Treasury chief Geithner sees US GDP growth of 2-3% in 2012

27 January 2012 16:59  [Source: ICIS news]

WASHINGTON (ICIS)--US Treasury Secretary Timothy Geithner said on Friday he expects that US gross domestic product (GDP) will grow by 2-3% this year and that the nation’s economy still faces tremendous challenges.

Speaking at the World Economic Forum in Davos, Switzerland, Geithner said US 2012 economic growth of up to 3% is a realistic forecast, but he cautioned that even that outcome could be in doubt if the European sovereign debt crisis worsens.

“I think that’s a realistic outcome,” he said of the 2-3% growth forecast, “as long as we don’t see a lot of risks coming out of Europe.”

In a normal economy, the US would be expected to have annual GDP growth of 3-3.5%.

Earlier on Friday, the Treasury Department reported that the US economy grew at an annualised pace of 2.8% in the fourth quarter compared with the 1.8% GDP expansion seen in the third quarter.

The department said much of the US fourth quarter GDP improvement could be attributed to export gains.

Because Europe is a major export market for the US, even a mild recession on the continent could hinder the US economy as well.

In addition to the ongoing eurozone sovereign debt crisis, Europe has again slipped into recession, although the downturn is expected to be mild.

“We still face tremendous challenges,” Geithner said, adding that the US economy is “still very dependent on how the world unfolds.”

He noted that US “unemployment is still very high, housing and construction are still very weak, people still have too much debt”.

Geithner said the US suffers from “very high levels of poverty ..., very high levels of inequality and an erosion in people’s confidence”.

On the positive side, he said the US economy does show some strong points.

“If you look at investments as a measure of confidence, private investment in equipment and software is up more than 30% since the trough in the first half of 2009,” he said.

“Exports are up by 23%. There’s a broad-based strength in energy, in agriculture, in manufacturing,” he said.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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