The U.S. economy is showing increasing signs of stabilization, the International Monetary Fund(IMF) said here Thursday.
According to IMF's latest World Economic Outlook (WEO) report, the U.S. economy is projected to contract by 2.7 percent in 2009 and will see a sluggish 1.5 percent growth in 2010.
"Output declined substantially during the first half of 2009 and the unemployment rate rose to a level not seen since the early1980s," IMF said in the semi-annual report, adding that growth is expected to turn positive in the second half of 2009.
"Unprecedented monetary, financial and fiscal policy interventions are helping stabilize consumer spending and housing and financial markets, which points to renewed moderate growth in the second half of 2009," the report said.
However, the report at the same time admitted that although financial conditions have improved significantly in recent months, markets remain stressed, which will weigh on investment and consumption.
Combined with the impact of rising unemployment, the temporary nature of the fiscal stimulus and subdued growth in trading partner economies, growth will remain sluggish, reaching 1.5 percent for 2010 as a whole, added the report.
The IMF also stressed that the strength and sustainability of U.S. recovery will depend on meeting three key policy challenges, namely continued stabilization of the economy and financial system, an appropriately timed and orderly unwinding of public support for the financial system and development of a strategy to shrink the Federal Reserve's balance sheet, addressing the long-term imbalances in public, household and financial balance sheets.
The WEO presents the IMF's analysis and projections of economic developments at the global level, in major country groups and in many individual countries. It focuses on major economic policy issues as well as on the analysis of economic developments and prospects.