White House says economy forecast still reasonable

WASHINGTON (Reuters) - Despite increasing worries among private analysts that the U.S. economy may be headed for a recession, the White House said on Wednesday it has no plans to change its official forecast calling for solid growth in 2008.

In a forecast released on November 29, the White House projected that the economy would grow by 2.7 percent in 2008.

Since then, a series of bleak reports showing declining retail sales and rising unemployment have reinforced concerns about the economy, causing many analysts to reduce their forecasts for 2008.

Several major Wall Street investment banks, including Merrill Lynch, Citicorp, Morgan Stanley and Goldman Sachs are predicting a recession, although some analysts believe the economy could skirt a downturn but will see a period of very slow growth.

But the White House is not forecasting a recession, nor does it plan to lower its forecast of 2.7 percent growth in 2008.

That economic outlook will form the basis of the budget projections President George W. Bush will unveil on February 4. The budget will also incorporate a proposed $150 billion stimulus package that Bush is negotiating with the Democratic-led Congress.

"The economic forecasts put out on November 29 will remain the same when the budget is released on February 4," said Sean Kevelighan, spokesman for the White House budget office.

"We believe the numbers are still reasonable and the implementation of a short-term economic growth package will be important for making the forecasts a reality," Kevelighan said.

Recession fears have roiled global financial markets, which suffered a huge sell-off earlier this week. In an emergency move on Tuesday, the Federal Reserve slashed short-term U.S. interest rates by three-quarters of a percentage point, the largest cut in more than 23 years.

Analysts in the closely watched Blue Chip Economic Indicators survey projected growth in 2008 of 2.2 percent in the publication's latest survey issued this month.

The panel, however, said there was a "heightened speculation about the possibility of a recession" and there had been some "red flags" in some recent reports such as a private survey on factory activity.

(Reporting by Caren Bohan; Editing by David Wiessler)