Washington: The sharp fall in the economic output of the world’s largest economy, the United States seems to be ending but the recovery is likely to be gradual as there are still some financial strains, the International Monetary Fund has said.
IMF in its annual report on the US said: “As a result of their increasingly strong and comprehensive policy measures, the sharp fall in economic output seems to be ending, and confidence in financial stability has strengthened.”
IMF has projected the real GDP for the United States for 2009 at negative 2.6%, and for the year 2010, it would improve significantly and was pegged at 0.8%.
However, as some financial strains are still round the corner, the recovery is likely to be gradual.
“With financial strains still elevated, the recovery is likely to be gradual, and risks are tilted to the downside,” the IMF report said.
The prospect in the job market however remains weak as the unemployment rate for United States is on an uptrend. The unemployment rate for US which was as low at 5.5% in 2004 is likely to touch 9.3% in 2009 and would further deteriorate to 10.1% in the year 2010, IMF added.
As per the IMF executive board assessment, policies under the Financial Stability Plan like-- stress tests, debt guarantees, and capital injections-- have contributed to a significant improvement in financial conditions.
However, incase the downside risks materialise, “additional fiscal stimulus could also be used, although the immediate focus should be on implementing the current fiscal measures and monitoring their impact,” IMF said.
According to the report the macroeconomic policies are providing significant support to demand, but United States still has to wait for a complete economic recovery.
Interestingly, the IMF executive board has noted that the crisis will have important implications for the role of the United States in the global economy and emphasised on the fact that the other regions will need to play an increased role in supporting global growth.
“The US consumer is unlikely to play the role of global “buyer of last resort.”