Economic recovery in US on track, but deficits threaten

Economic recovery in US on track, but deficits threaten

In a recent statement, Organization for Economic Cooperation and Development said that US' economic situation is getting better as business investments record improvement. However, OECD warned that the huge deficit in US current account and budget may cause defect to long term economic prospects. OECD expects US economy to grow by 4.5% this year which is foreseen to slow down to 3.7% in 2005. US economy started to recover in mid 2003 and expanding gradually due to household and government spending along with the business investments. OECD also forces US government to take precautions to ravel the current account and budget deficits that put the future growth under threat. Although the recent tax cuts have supported the recovery to a certain extent, it is reported that savings and tax base need to be increased. OECD expressed that the government should increase the tax base rather than reversing tax cuts to prevent the deficits. It is also reported that if the tax base can not provide enough income then the US government should consider a national value added tax. Meanwhile, as per the data released by Commerce Department, US trade deficit increased by 3.2% to $42.1 billion in February. Exports surged by 4% to $92.4 billion in February while imports were up by 1.6% to $134.5 billion. This was the biggest increase in exports since October 1996.