IMF sees US falling into recession
Updated: 2008-04-09 23:23
Against that backdrop, the IMF now expects the world economy, which grew by a hardy 4.9 percent last year, to lose considerable momentum. The fund is projecting the global economy to grow by 3.7 percent this year and 3.8 percent next year.
"The global expansion is losing speed in the face of a major financial crisis," the IMF said.
There's a risk that things could turn worse, it cautioned.
"The IMF now sees a 25 percent chance that global growth will drop to 3 percent or less in 2008 and 2009 - equivalent to a global recession," the fund said. "The greatest risk comes from the still-unfolding events in financial markets, particularly the potential for deep losses" on complex investments linked to the US subprime mortgage market, the IMF said.
Looking at other countries, the IMF trimmed its projection for Germany, with economic growth slowing to 1.4 percent this year and weakening to 1 percent in 2009. In Britain, growth will slow to 1.6 percent this year and next. France also will see growth decelerate to 1.4 percent this year and 1.2 percent next year.
Japan's economy will expand by 1.4 percent this year and 1.5 percent next year, which would mark a loss of momentum from last year. Canada's growth would slow to 1.3 percent this year and pick up slightly to 1.9 percent next year.
Global powerhouse China, which increased by 11.4 percent last year, would see growth moderate to 9.3 percent this year and then strengthen a bit to 9.5 percent next year. India, which grew by a blistering 9.2 percent last year, is expected to grow by 7.9 percent this year and 8 percent next year. Russia, which logged growth of 8.1 percent last year, will see growth moderate to 6.8 percent this year and then 6.3 percent next year.
While the IMF is worried about the dangers of weakening global economic growth, it also expressed concern about the potential for inflation to heat up around the world, given sharp increases in energy and other commodity prices. "Risks related to inflationary pressures have risen," the fund said.
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