The short-to-medium term growth outlook for the US economy remainsconstructive due to a tightening labour market and a continuedrecovery in private investment.
We remain cautious in our longer-term outlook given policy uncertaintyemanating from President Donald Trump's administration and GDPgrowth is likely to disappoint.
We expect wider budget deficits and a higher debt-to GDP ratio inthe years ahead as tax rate cuts lowering revenue will not be accompaniedby offsetting reductions in entitlement spending.
Intraparty fissures among Republicans, highlighted by the failure topass the 'Obamacare' replacement bill, will deteriorate the politicalenvironment in Washington and impede Trump from enacting hisambitious legislative agenda.
Major Forecast Changes
We have revised our 2017 real GDP growth projection up to 2.1%from 2.0%, alongside an increase in our private consumption projectionto 2.7% from 2.6%.
We have upwardly revised our forecast for the euro versus thedollar in 2017 from USD1.10/EUR to USD1.13/EUR. We forecastthe dollar to make a modest comeback versus the euro in 2018, toUSD1.10/EUR on average, before modestly appreciating again toa long-term trading range of USD1.15-1.20/EUR.