WASHINGTON, June 16 (Xinhua) -- The International Monetary Fund (IMF) on Monday cut its forecast for U.S. economy this year to 2 percent due to a weak first quarter. As better prospects lie ahead, the IMF suggested the U.S. government make reforms for uncertainties and long-term growth.
In its annual economic assessment report of the U.S. economy, the IMF said, "In the early part of this year, as a harsh winter conspired with other factors, momentum faded in the U.S. economy."
"We have revised downwards our growth forecast for 2014 down to 2 percent. That is largely attributable to the poor results of Q1, which are largely not entirely weather-related," IMF chief Christine Lagarde told reporters.
"It's not the main message that we want to give on growth. We believe that this slowdown is temporary and better prospects lie ahead," she added. "We believed that there will be growth in the coming quarters at about 3 percent or possibly higher than that."
In the report, the IMF maintained the 3-percent growth expectation for 2015, the highest annual rate for the United States since 2005.
Although the economy data is warming up from the tough winter, the real situation may not so good as they showed.
The U.S. unemployment rate has fallen to the lowest level in five years at 6.3 percent in April and kept this level in May. The IMF believed the U.S. job growth remained healthy but labor market was weaker than it was implied by the data.
"Long-term unemployment is high, labor force participation is well below what can be explained by demographic factors and wages are stagnant," said the report.
In addition, the IMF found the long-term growth rate of the United States fell to a historical low level, caused by a combination of factors including aging population and more modest prospects for productivity growth.
"We have revised downwards our projection for the long-term growth rates of the United States to around 2 percent. That is clearly significantly lower than the 3 percent average that we have seen between 1948 and 2007," said Lagarde.
To face these uncertainties in the economy and boost long-term growth, the IMF asked the U.S. government to provide continued policy supports and make some structural reforms.
"We recommend targeted policies that help poor families make ends meet. First of all we recommend an expansion of Earned Income Tax Credit. It's a program that works, that has been around for the last 40 years that is currently restricted to families with children. We certainly recommend that it be expanded beyond the family circle," said Lagarde.
"We also argue for an increase in the minimum wage, which in the U.S., relative to the medium wages is among the lowest in the advanced economies, 38 percent," she added.
The IMF also suggested the U.S. government take measures involving investments in infrastructure and education, improving the tax system and active labor market policies.
"They may also include reaching agreement on a broad, skills- based approach to immigration reform as well as fully capitalizing on the gains from rising U.S. energy independence while protecting the environment," said the IMF in the report.
The Washington-based global lender reckoned no single measure will be sufficient and a manifold solution will certainly be required. "There is no shortage of good ideas currently under public debate and so the challenge ahead is to forge political agreement on specific legislation."