The International Monetary Fund(IMF) said on Friday the current economic
slowdown in the United States "has been less than feared," and recovery should
begin next year as important headwinds are overcome.
"Considering the severity of the shocks that have hit, the economy has held
up well so far, with substantial monetary and fiscal stimulus, buoyant net
exports, and healthy corporate balance sheets all providing welcome support,"
said the IMF in a statement.
"However, their effect is being blunted by growing strains on household and
bank finances, and now also by higher commodity prices. These strains, which
have yet to fully feed through to domestic demand and activity, will take time
to work out," the statement added.
The IMF thus projects that real GDP in the United States will be "roughly
flat" in 2008, and recover gradually in 2009 to around2 percent.
"Although inflation expectations have ticked up on surging commodity prices,
we expect that price pressures will be contained as commodity prices peak and
economic slack rises," said the fund.
It also pointed out that the unusual nature of the ongoing crisis in the
financial and housing sectors leaves the outlook highly uncertain.
"A more rapid recovery is clearly possible, given the substantial policy
stimulus and proactive response of financial markets to repair balance sheets,"
said the agency, noting that the world's largest economy, however, is facing
historically unprecedented shocks, financial conditions currently presage
further tightening.
"There is the worrisome possibility that weakening activity will feed back
into further bank losses, generating a longer slowdown," it warned.
"US authorities are to be congratulated on their rapid and innovative
responses to a complex crisis, but significant challenges lie ahead," it added.
"The policy reactions will help minimize disruption not only in the United
States but across the world," said the IMF, noting that these actions will need
to be supplemented by broader efforts in major countries to foster stability in
international financial markets and maintain an open trading system in the
period ahead.