US 'sequester' cuts to hit US, global growth: IMF

WASHINGTON (AFP) - The broad US "sequester" spending cuts that take effect beginning on Friday will slow growth in the world's biggest economy and hit the global economy, the International Monetary Fund said on Thursday.

"There will be an impact on global growth," IMF spokesman Bill Murray said.

"We're going to have to reevaluate our growth forecast in the United States and also our other forecasts." Murray emphasised that the US$85 billion (S$105 billion) in US spending cuts, known as sequestration, will be phased in over seven months.

The drastic cuts were mandated after Democrats and Republicans failed to reach an agreement on budget deficit reduction.

"It's really going to affect US growth," Murray said. "We have to see how deeply the spending cuts are implemented." The IMF's current US growth forecast for 2013 is 2.0 per cent and economists expect that full implementation of the sequestration will subtract at least 0.5 percentage points from growth.

As for the impact on global growth, Murray said, "The countries most affected will be countries that have active trade relations with the United States."

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