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Washington (AFP) – The International Monetary Fund on Wednesday lowered its U.S. economic growth forecast for 2014 after severe winter weather in the first quarter delivered a sharp contraction.

The IMF projected that the world’s largest economy would grow a “disappointing” 1.7 percent this year, after a 1.9 percent expansion in 2013.

The forecast marked another downgrade from the IMF, which estimated U.S. growth of 2.0 percent for the year in mid-June, down from a 2.8 percent estimate in April.

“An unusually harsh winter conspired with other factors, including an inventory correction, a still-struggling housing market, and slower external demand” to lead the economy to contract by 2.9 percent in the first quarter, the 188-nation global lender said.

Although activity appears set to pick up in the rest of the year to well above the country’s growth potential in a range of 3.0-3.5 percent, it would not be able to offset the first-quarter drag, the worst contraction in five years.

“This means growth for the year as a whole will be a disappointing 1.7 percent,” the IMF said in a statement following its annual report card on the member economy, known as an Article IV consultation.

But the following year should see a strong rebound, with 2015 growth picking up steam to the fastest annual pace since 2005, it said.

The IMF predicted the improvement would be driven by strong consumption growth, a declining fiscal drag, a pickup in residential investment, and easy financial conditions.

“Risks around this outlook include slowing growth in emerging markets, oil price spikes related to events in Ukraine and Iraq, and earlier-than-expected interest rate rises.”

AFP Photo/Joe Raedle

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Reprinted with permission from Alternet

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