The International Monetary Fund has said it sees the recession-stricken US economy stabilising and backed the US government's plan for financial sector regulatory reform.
In a final annual report on the world's biggest economy, in line with a staff report in June, the IMF modified its projections on gross domestic product (GDP), a broad measure of the country's goods and services output.
The multilateral institution estimated US GDP would shrink 2.6% in 2009, slightly worse than its June estimate of a 2.5% contraction.
'The combination of massive macroeconomic stimulus and financial market intervention began to stabilize financial and economic conditions,' the IMF executive board concluded after the Article IV annual consultation with US authorities.
'That said, economic activity remains weak, while financial conditions remain somewhat stressed,' the IMF said.
The IMF forecast that financial strains would weigh on investment and, along with the effects of rising unemployment and falling house prices, consumption.
'The recovery is likely to be gradual,' it said, and 'potential growth could remain well below past trends for a considerable period.'
The Washington-based institution strongly endorsed recent proposals by US President Barack Obama's administration 'for substantial reform and strengthening of financial supervision and regulation.'
It welcomed 'key steps' in the administration's plan, including improving transparency in rating agencies' operations and encouraging more standardised securitisation 'through market codes of conduct.'
