The US economy will contract 0.7 percent in 2009, the International Monetary Fund (IMF) projected yesterday, marking a sharp downward revision from its October forecast.

Just a month ago, the IMF had said US growth will be at 0.1 percent next year, but now sees far more difficult conditions worldwide including the first contraction in advanced economies since World War II.

"The US economy will suffer, as households respond to depreciating real and financial assets and tightening financial conditions," the IMF said in its latest forecast for world economic growth.