IMF predicts US economic recovery

The International Monetary Fund (IMF) has said the US economy will recover more strongly and more quickly, than it previously thought.

It now believes that the world's largest economy will grow by 0.75% next year, rather than the 0% it forecast earlier this year.

The IMF also thinks that the US economy will shrink less sharply this year.

However, the fund stresses that "an unusual level of uncertainty" and "significant downside risks" remain.

'Solid recovery'

The fund's latest report on the US economy predicts a fall in GDP of 2.5% this year, compared with its previous forecast of a 2.8% contraction.

The slight improvement in outlook for both this year and next is, in part, due to the US government stimulus plans that have "become increasingly strong and comprehensive" since the end of last year, the report said.

But despite the fact that recent figures suggest the sharp fall in output may now be ending, "economic activity remains weak", it continues.

"The combination of financial strains and ongoing adjustments in the housing and labour markets is expected to restrain growth for some time".

For this reason, "a solid recovery [is] projected to emerge only in mid-2010," the IMF predicts.

The fund also predicts that US unemployment will "peak at close to 10%" next year.

The IMF forecast forms part of its regular economic assessment which it carries out among its members.

Figures released earlier this month showed that the pace of US job cuts slowed dramatically in May, while separate data published in May showed US consumer confidence at its highest level since September last year.

Such figures have led a number of economists to believe that the US recession may be bottoming up.