Dubai, Sept 18: The US economy is set to move into a phase of faster growth in the second half of this year but the overvalued dollar and the ballooning fiscal deficit could knock the recovery off course, the IMF said on Thursday. The International Monetary Fund revised up its forecasts and predicted the US economy would expand 2.6 per cent this year and 3.9 per cent next, up from April's forecasts of 2.2 per cent and 3.6 per cent.

"The IMF staff continues to project a renewed recovery in the second half of 2003 and 2004, at a somewhat stronger pace than earlier expected, with GDP growth rising above potential from the third quarter onward," it said in its semi-annual World Economic Outlook report.
The IMF growth predictions are in line with the outlook from private sector economists and put the world's largest economy in the number one growth slot among G7 for this year and next.
Fiscal and monetary stimulus and a pickup in forward looking economic data such as consumer and business sentiment all contributed to better growth expectations, the report said.
The IMF said it is appropriate that the Federal Reserve had signaled that it planned to keep interest rates low for some time. However, the fund said the weakening of the dollar could help the recovery and "bring forward the time when a steady withdrawal of monetary stimulus becomes appropriate." Bureau Report