Clearwater, Florida, - Outlook and Opportunities

April 15, 2011 - PRLog -- The International Monetary Fund took an unusually tough tone with the U.S. in its annual economic outlook, revising down its 2011 growth forecast to 2.8% and warning that the country's debt problems could destabilize the global financial system.

The IMF said in its 2011 World Economic Outlook that the U.S. could once again be the epicenter of global financial woes if the government doesn't soon draft a credible medium-term plan to slash its mountain of debt and bloating deficit.

Addressing the issue is "particularly urgent," it said.

The U.S. Treasury Department said the U.S. deficit and debt are among President Barack Obama's top priorities and that his budget proposals go a long way to meeting the administration's international commitments. Treasury officials acknowledge that it will be a difficult task, but said the government's not shying away.

While there's little risk of a broad-based rise in U.S. government bond rates in the short term, the fund said growing market concerns over the government's ability to finance its obligations means there's a chance of sudden bond rate volatility, especially in risk premiums, which "could threaten global financial stability."

U.S. Treasury officials say there's always risk in bond markets, but based on current bond pricing, the market doesn't share the IMF's concern.

Given emerging markets' exposure to the U.S. dollar, a rise in U.S. bond rates would hit emerging markets particularly hard, the IMF said.

The political challenges of forging cuts in the budget were on display late last week as Republicans and Democrats faced off over this year's spending to the point of a near shut-down of the federal government. And politicians didn't even touch some of the most sensitive issues for voters: raising taxes and axing entitlement spending, two policies the IMF says are vital to address its fiscal problems.

The Obama administration promised the Group of 20 leading economies last year to halve the U.S. deficit by 2013. But given that would require adjusting its balance sheet by about 5% of the country's gross domestic product between 2012-2013, it "will be challenging to implement, especially in an environment of weak growth and elevated unemployment," the IMF said. Such an adjustment would be larger than any two-year move by the government in the past half-century.

The fund said the U.S. is also likely to fail to meet another G-20 commitment, stabilizing the ratio of debt-to-growth by 2016. Instead, the IMF predicts that, unlike the administration's projections, the ratio will rise from its current level of around 72% to more than 110% by 2016.

In Florida, state lawmakers debate about the budget, UCF economist Sean Snaith warns that cutting corporate and property taxes isn’t the way to draw more businesses and jobs to the Sunshine State.

Florida already has one of the lowest tax burdens in the nation and only lags behind South Dakota, Alaska, Wyoming and Nevada for the best business tax climate in the country, Snaith says in his latest quarterly statewide forecast.

“There is not much room for improvement as far as the tax climate in Florida is concerned, and trying to be the cheapest date in the country is not going to bolster the number of suitors Florida has,” said Snaith, the director of the University of Central Florida’s Institute for Economic Competitiveness. “There is very little to win in our race to the tax bottom.”

– Unemployment rates in Florida may drift higher as the economy transitions into “job growth mode.” This year should mark the beginning of a long, slow and steady decline in unemployment. But it may be 2018 before we see unemployment fall below 6 percent again.

– Real Gross State Product in Florida will expand 2.4 percent this year and then 3.3 percent in 2012, 3.6 percent in 2013 and 4 percent in 2014.

– Florida’s population growth will continue its slow recovery in 2011. By 2014, the growth rate could hit 1.9 percent as the damage from the “Great Recession” is repaired and the Baby Boomer retiree influx starts to swell.

– Housing starts in Florida will continue at a painfully slow climb this year. Total starts will be 56.8 annually during the fourth quarter of 2011. By the fourth quarter of 2014, that number will be 168.8 – more than 100,000 fewer starts than at the peak of the housing boom.

– Unemployment rates in Florida may drift higher as the economy transitions into “job growth mode.” This year should mark the beginning of a long, slow and steady decline in unemployment. But it may be 2018 before we see unemployment fall below 6 percent again.

– Real Gross State Product  in Florida will expand 2.4 percent this year and then 3.3 percent in 2012, 3.6 percent in 2013 and 4 percent in 2014.

– Florida’s population growth will continue its slow recovery in 2011. By 2014, the growth rate could hit 1.9 percent as the damage from the “Great Recession” is repaired and the Baby Boomer retiree influx starts to swell.

– Housing starts will continue at a painfully slow climb this year. Total starts will be 56.8 annually during the fourth quarter of 2011. By the fourth quarter of 2014, that number will be 168.8 – more than 100,000 fewer starts than at the peak of the housing boom.

His entire report is available online at: http://iec.ucf.edu/post/2011/04/14/Florida-Metro-Forecast...

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