The US economy will not fall into a new recession and the country's budget deficit will decline sharply in the next three years, the White House said Thursday.
While growth will remain sluggish this year, in the 1.7-2.2 percent range, the economy is not expected to contract, according to a mid-year review of the budget and economy.
Even though growth remains weak two years after the last contraction ended, "We are not forecasting a double-dip recession," said Katharine Abraham, a member of the White House Council of Economic Advisers.
Owing to steep spending cuts and a better-than-expected rise in receipts, the country's huge fiscal deficit -- which earned it a first-ever downgrade from ratings agency Standard & Poor's in August -- will be only 8.8 percent of gross domestic product this year, compared to 10.9 percent anticipated in January.
The deficit will fall to 6.1 percent of GDP by next year and just 2.7 percent in 2014, the White House's Office of Management and Budget said.
But the government expects the politically charged issue of high unemployment to persist.
Currently 9.1 percent, the jobless rate could be still as high as 9.0 percent late next year, or at best 8.2 percent.
That is likely to remain a key issue as President Barack Obama faces a stiff Republican reelection challenge in November 2012 based on his record on the struggling US economy.