The US will see a "solid" recovery from the downturn next year, the International Monetary Fund (IMF) declared today in the latest indication that the recession has bottomed out.

The group, which had previously delivered some of the gloomiest forecasts about the global economy, today revised its view, saying the US was set to grow more strongly than previously thought.

In its annual report on the world's biggest economy it forecast that a heavy dose of stimulus would see the US contract by 2.5 per cent this year, with a modest expansion in 2010 of 0.75 per cent.

Previously, it had forecast that the economy would shrink by 2.8 per cent in 2009 and improve slightly but show no growth next year.

However, it stressed that factors like the housing crisis and rising interest rates, still presented strong risks to a recovery and cited the "unusual level of uncertainty" in its latest projections.

"The ... outlook remains for a gradual recovery ... (with) a solid recovery projected to emerge only in mid-2010," the group said.

"The combination of financial strains and ongoing adjustments in the housing and labour markets is expected to restrain growth for some time."

It also said that it considered the dollar to be over-valued since it is "presently only modestly above the level implied by medium-term fundamentals".

The IMF forecast is the latest in a spate of more upbeat indicators about the global financial crisis.

Earlier this month, a fillip to Britain emerged when a new survey suggested that the services sector, the engine room of the economy, grew in May, for the first time in more than a year.

The headline reading in the CIPS/Markit monthly barometer of services climbed to 51.7 for last month, from 48.7 in April, in a sixth consecutive rise that took it back above the key 50 mark that signals renewed expansion, and to the best level since April 2008.

Last week, data also showed the first rise in industrial production for 14 months. ONS figures showed that industrial output in April rose 0.3 per cent from March — the first rise since February 2008. Analysts had forecast a fall of 0.1 per cent.

The IMF forecast that over 2009-2011 the federal deficit will average 9 per cent of gross domestic product.

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