White House: US economy is in "rough patch," but sound

Business Materials 12 February 2008 03:12 (UTC +04:00)

( dpa )- US President George W Bush Monday said the US economy was "structurally sound for the long term" as he signed off on a report that conceded the country was "facing a rough patch.

The president's council of economic advisors, which prepared the report, projected positive, if somewhat muted, growth for 2008. Bush noted that an economic stimulus plan passed last week by Congress would go a long way to addressing the short-term "uncertainties."

The report comes amidst fears of a US recession and an escalating financial crisis from the subprime credit crisis that resulted from loans to high-risk borrowers. The financial ripples have depressed home values and braked consumer spending that ordinarily buoys the world's largest economy.

US growth slumped drastically in the last quarter to 0.6 per cent, a figure that was half that expected and compared to third quarter growth of a robust 4.9 per cent. Average growth for 2007 was expected to be about 2.5 per cent, but final figures are not yet in, the advisors said.

Despite the daunting financial news, the president's advisors said they expected growth to continue this year, if at a "slower pace in the first half of 2008, followed by strengthened growth in the second half of the year."

The advisors said low taxes and open markets were essential for long-term growth, and called for the country to address rising health care costs and diversify its energy portfolio.

Bush noted that the economic stimulus plan, which he planned to sign on Wednesday, would inject 160 billion dollars into the economy. to address the short-term problems.

Under the plan, most US taxpayers would receive at least a 600- dollar tax rebate check, probably before the end of May. Families could receive as much as 1,200 dollars and an additional 300 dollars for each child.

"What that means is, it means that money will be going directly to America: workers and families and individuals," he said.

The Federal Reserve, which sets monetary policy, has warned of slower economic growth for 2008 and has slashed interest rates. The Fed twice cut the key interest rate by a combined 1.25 percentage points to 3 per cent last month.