IMF projects 'solid' US recovery in mid-2010

By AFP

July 15, 2010 Updated Jun 15, 2009 at 10:01 AM CDT

The International Monetary Fund on Monday said the US economy was set to grow more strongly than previously thought, with a "solid" recovery from recession in mid-2010, but cited risks, notably from the housing crisis and rising interest rates.

In its annual report on the world's biggest economy, the IMF projected gross domestic product (GDP) would shrink at an annualized rate of 2.5 percent in 2009, less sharply than the 2.8 percent contraction estimated in April.

Annual growth would return in 2010, at a weak 0.75 percent pace, compared with the prior estimate of flat activity.

"The staff's outlook remains for a gradual recovery," followed by a "solid recovery projected to emerge only in mid-2010," the multilateral institution said.

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

The 185-nation institution underscored the "unusual level of uncertainty" in its latest projections.

Among the "significant downside risks," the IMF cited the real-estate crisis, marked by spiking foreclosures and falling home prices, as well as a slump in the commercial sector; rising interest rates that are pressuring both the government and businesses; and the global economic and financial crisis.

The IMF also said it considered the dollar overvalued, since it "is presently only modestly above the level implied by medium-term fundamentals."

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