IMF set to cut US-Japan growth forecasts

BERLIN, April 11 (Bloomberg): The International Monetary Fund has lowered its forecast for economic growth in the US amid rising commodity prices and downgraded its outlook for Japan after the earthquake and tsunami, a German government official said. Deficit reduction strategies in the US and Japan lack credibility, the IMF said in its World Economic Outlook, the German official told reporters in Berlin today on condition of anonymity because the report will be published in Washington later today. The IMF, which forecast 3 per cent US growth this year in January, left its latest projection for global growth unchanged, the German official said, without giving time-frames. "US forecasters became overly optimistic in the latter part of last year," John Greenwood, chief economist at Invesco Ltd in London, said in a telephone interview. "In general, the economic forecasting community doesn't pay enough attention to the longer-term balance sheet issues of large-scale government debt and private-sector debt and the need for deleveraging in both households and the financial sector." While the likelihood of a double-dip economic slump have decreased, risks to growth mean the world economy is more likely to disappoint than to beat expectations, the German official cited the IMF as saying. Commodity-price shocks, especially oil, have emerged as a new risk to global economic expansion, the official said. The IMF and World Bank will hold their Spring meetings in Washington on April 15-17. Finance ministers from the Group of Seven -- the US, Japan, Germany, France, the UK, Italy and Canada -- and Russia will hold a special meeting on April 14 to discuss the situation in the Middle East and North Africa, the German official said. Brent oil for May settlement traded at $124.96 a barrel, down $1.69, on the London-based ICE Futures Europe exchange. The contract increased $3.98, or 3.2 per cent, to end the session at $126.65 on April 8. "I don't think the current level of tension in the Middle East and North Africa is enough to retard growth on its own," said Greenwood. "The oil price would have to go up to another $20-30 a barrel to be a serious constraint on growth." The US economy will expand 2.9 per cent this year and 3.1 per cent in 2012, according to the median estimate of about 70 economists surveyed from April 1 to April 7. The US economy grew 2.9 per cent last year, the most since 2005, according to figures from the Commerce Department. The German official didn't give an IMF forecast for US growth. The IMF estimates damage from the earthquake and tsunami that struck Japan a month ago to amount to between 3 per cent and 5 per cent of the nation's gross domestic product, the German official said. The IMF raised its growth forecasts for Germany for this year and next, noting improved economic growth dynamism and progress in cutting the deficit as well as lowering unemployment, the official said.