WASHINGTON, Dec 17 (AFP) - The US economy is expected to slow to a still-solid 3.5 percent growth pace in 2005, allowing it to trim a record budget shortfall, the White House said Friday.
"The economy is in a very solid shape," Council of Economic Advisers chairman Gregory Mankiw told reporters.
Real annual gross domestic product growth was expected to dip to an annual rate of 3.5 percent in the last quarter of 2005 from 3.9 percent this year, the administration said.
"Fiscal restraint and a strong economy are the two critical elements required to cut the budget deficit in half by 2009," said Office of Management and Budget (OMB) director Joshua Bolten.
"This forecast shows that the pro-growth policies we have enacted will help generate the economic growth necessary to meet that goal," Bolten said in a statement.
President George W. Bush's administration has promised to halve in five years a record budget deficit of 413 billion dollars in the 2004 fiscal year ended September 30.
Bush told an economic meeting at the White House on Wednesday that he aimed to curb the deficit through a growing economy and by submitting a "tough budget" that reins in spending outside of the military and defense.
The White House economic forecasts were drawn up jointly by the OMB, the Council of Economic Advisers, and the Treasury Department.
The unemployment rate was projected to gradually decline from 5.4 percent of the labor force now to 5.3 percent next year, 5.2 percent in 2006 and to 5.1 percent in 2007 and later years.
The US economy has churned a net 185,000 new jobs per month on average during the first 11 months of 2004, the White House said, quoting Labor Department data.
Those figures were expected to be revised upwards, the department has said.
Job growth during the four quarters of 2005 was expected to be about 175,000 per month.
"Given the powerful contractionary forces at work since early 2000, the strength of our economy is remarkable," Mankiw said.
"The United States faced the bursting of the high-tech bubble of the 1990s, corporate scandals, and slow growth among our trading partners, and today our economy is strong and growing."
The White House predicted inflation, as measured by the price index for gross domestic product, would ease to 1.9 percent next year from 2.3 percent in 2004 after being temporarily boosted during the past year by high oil prices."
Consumer prices inflation was tipped to slide to 2.0 percent next year from 3.4 percent this year.
US Treasury Secretary John Snow praised Bush's tax cuts for stimulating economic activity.
"Today's forecast demonstrates that the substantial tax relief passed in President Bush's first term, together with expansionary monetary policy, provided economic stimulus and put the economy on the road to recovery," Snow said.
Bush has passed tax cuts with a value approaching 1.9 trillion dollars over the next decade. All the cuts expire by the end of 2010. Some expire earlier.
12/17/2004 17:59 GMT - AFP