IMF forecasts U.S. economic recovery in mid-2010

The International Monetary Fund (IMF) expects the U.S. economy will not recover until the middle of next year, according to an assessment of the domestic economy released Monday.

“The combination of financial strains and ongoing adjustments in the housing and labor markets is expected to restrain growth for some time, with a solid recovery projected to emerge only in mid-2010,” the IMF said in a report on the U.S. economy conducted under a section of the organization’s rules.

The IMF report, though, largely praised the practices of the Obama administration in response to the recession, though it acknowledged that serious challenges still remain for the president.

The $787 billion stimulus signed into law earlier this year by President Obama was “well targeted, timely, diversified, and sizeable,” the IMF reported, projecting a one percent boost in gross domestic product (GDP) as a result of the spending in 2009, and a .25 percent boost next year.

The report also praised the Treasury-led initiative to partner with financial institution to help rid toxic assets from banks’ balance sheets.

Still, the IMF said the administration had major challenges on the horizon, including setting the stage for sustained recovery, unwinding its intervention in the economy, and reshaping the financial and housing markets.

“Going forward, unwinding interventions will pose major challenges, and — given the high level of cross-border competition in the financial sector — will need to be coordinated internationally to facilitate a smooth exit,” the report said.

The report comes as the U.S. commitment to the IMF is being hotly debated in Congress as part of the spending on the war supplemental bill. Republicans have derided the IMF funding, topping $100 billion, as a bailout for the international economy, and have refused to vote for a supplemental to which IMF funding is attached.