"Big jolt" unlikely from U.S. budget cuts: World Bank economist
JOHANNESBURG, March 5 (Reuters) - Budget cuts triggered by the fiscal crisis in the United States will have some effect on the global economy although it is unlikely to be a "big jolt", the World Bank's chief economist said on Tuesday.
Speaking at Johannesburg's Wits University, Kaushik Basu said the bank was still trying to work out the impact of the latest spending cuts which the International Monetary Fund said last month would shave at least 0.5 percentage points off 2013 U.S. growth if implemented in full.
He said it was too early to say whether the bank would have to cut growth forecasts released in January but the greater threat of a U.S. "fiscal cliff" of automatic tax rises as well as spending cuts was over.
"We were semi-expecting the sequester," said Basu, a former chief economic adviser to the Indian finance ministry, referring to across-the-board spending cuts aimed at capping U.S. public debt in the absence of a negotiated budget deal.
"Fortunately, the United States has managed to take us over the fiscal cliff very, very gently. The sequester is going to have some negative effect but not as strongly as the fiscal cliff," he said.
"People were beginning to expect it, so it hopefully it is not going to be as big a jolt as many people had feared."
Under the terms of the sequester, U.S. government agencies must cut their spending by $85 billion after President Barack Obama and Congress failed last week to agree to an alternative deficit reduction plan.
The cuts will be rolled out in coming weeks and months.
The sequester was not supposed to happen. Republicans and Democrats in 2011 set up the deep cuts to military and domestic spending as a worst-case scenario that would force them to reach tough decisions to set U.S. finances on a sustainable course.
(Reporting by Ed Cropley; Editing by Ruth Pitchford)