U.S. economy to grow 3.1% in 2010: IMF

22:07, April 21, 2010      

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Driven by a stimulus-led recovery, the U.S. economy is expected to grow by 3.1 percent in 2010, said the International Monetary Fund (IMF) on Wednesday.

"Substantial monetary and fiscal easing, alongside other policies aimed directly at the financial and housing sectors, has provided a broad-based fillip to growth," said the IMF in its latest World Economic Outlook report.

According to the report, in the United States, financial market strains have continued to ease, liquidity spreads and investment-grade spreads have mostly returned to pre-crisis levels, equity markets have recovered from lows reached in early 2009, and corporate bond issuance is now running above pre-crisis levels.

But the IMF said private demand in the United States remains "soft," adding "the private final demand is still subdued and remains well below pre-crisis levels."

In the fourth quarter of 2009, U.S. consumption rose by only 1.6 percent as households continued to rebuild wealth.

In the United States, labor market remains "unusually weak," according to the report, more than 7 million jobs have been lost, and 8.8 million people are involuntarily working part-time since the start of the crisis. The unemployment rate had reached 10 percent by the end of 2009.

Moreover, "with banks' balance sheets still not fully repaired from the crisis, and with losses mounting in certain sectors such as commercial real estate, financial conditions may remain a drag on growth, particularly for small and medium-size enterprises that cannot access capital markets."

"The recovery ahead is expected to be gradual, particularly when the effects of the stimulus subside," said the IMF, adding that the removal of policy stimulus will subtract from growth, which will moderate to 2.6 percent in 2011.

According to the report, U.S. economy's recovery will be tempered by households' continued need to rebuild wealth, the expected slow but necessary process of financial sector repair and deleveraging, and continued weakness in the labor market.

The report said that U.S. unemployment is projected to be 9.5 percent in 2010 and 8.25 percent in 2011, and that inflation is expected to remain subdued, at 2 percent in 2010 and 1.75 percent in 2011.

In the report, the IMF said "the global recovery has evolved better than expected, with activity recovering at varying speeds, tepidly in many advanced economies but solidly in most emerging and developing economies."

The world economy, which declined by 0.6 percent in 2009, will recover gradually in 2010 and 2011, growing by 4.2 percent and 4.3 percent respectively, said the IMF.

Source: Xinhua


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