IMF cuts global growth forecast for 2008
The International Monetary Fund lowered its outlook for 2008 world economic growth for the second time this year, cutting it to 3.7 per cent from a January forecast of 4.1 per cent.
The revision puts world growth at its lowest since 2002, when growth was 3.1 per cent.
“I can confirm the IMF’s current aggregate world growth forecast for 2008 is 3.7 per cent,” an IMF spokesman said, confirming reports about the IMF’s World Economic Outlook due on April 9.
The further revision acknowledges the US-led housing downturn and subsequent credit contraction have exacted a heavy toll on the world economy.
Earlier on Friday, IMF chief economist Simon Johnson said the US economy has come to “a virtual standstill” and will remain weak in coming quarters due to deepening problems in housing and credit markets.
Still, Johnson avoided saying the US was in recession.
“Notwithstanding the strong response from US policy-makers, tighter financial conditions, higher energy prices, softer labour markets, and the weak housing market all conspire to weigh heavily on the (US) economy in the near term,” Johnson told reporters.
Speaking before the April 9 release of the IMF’s twice-yearly World Economic Outlook, Johnson said economic growth in Europe would also slow this year, perhaps with some lag, because of the United States’ weak performance.
He said deeper and more protracted strains in financial markets posed the biggest threat to the world economy, with economic growth in major emerging economies also likely to weaken, although it should stay above trend.
“An intensification of problems in the US housing and credit markets could further slow the US economy and weigh on the arc of recovery,” he cautioned.
He said turmoil in financial markets could slow financial flows into emerging and developing countries, including in Eastern Europe, which have benefited from large banking inflows in recent years.
Furthermore, weaker global growth could slow exports and prompt a fall in commodity prices, Johnson said, adding that rising global oil and food prices had pushed up inflation pressures worldwide.
