Washington, Jan 30, SPA — The International Monetary Fund (IMF) on Tuesday lowered its 2008 global growth forecast, citing a U.S. slowdown and financial-market turmoil that have put emerging economies at risk.
Despite predicting that world economic growth will slow significantly, the IMF said in an update to its twice-yearly World Economic Outlook that the United States will avoid recession.
The IMF forecast that global economic growth will slow to 4.1 percent this year, down from 4.9 in 2007. U.S. economic growth will slow to 1.5 percent in 2008, down from an estimated growth rate of 2.2 percent in 2007. The 2008 projection is lower than the IMF’s October 2007 forecast of 1.9 percent.
Tuesday’s report was the second time the global lending organization has reduced its 2008 growth projection. Last July, the IMF estimated the world economy would grow 5.2 percent in 2008, but in October, the estimate was reduced to 4.4 percent.
“The five-year-long global expansion has begun to moderate in response to the spreading effects of financial disruptions,” IMF research director Simon Johnson told reporters in Washington.
“The financial market strains originating in the U.S. sub-prime [mortgage] sector-and associated losses on bank balance sheets-have intensified, while the recent steep sell-off in global equity markets was symptomatic of rising uncertainty,” the IMF said, adding that the United States is the “epicenter” of the global slowdown.
“The overall balance of risks to the global growth outlook is still tilted to the downside,” the report said, adding that the main risk is that the ongoing financial-market turmoil would further reduce activity in the advanced economies and “create more significant spillovers into emerging-market and developing economies.”
The stimulus package being negotiated between Congress and the White House, along with the Federal Reserve’s recent reduction of a key interest rate, should provide a modest boost to U.S. economic growth by the middle of the year, IMF officials said.