Recession fears grow on talk of IMF forecast cuts
The International Monetary Fund is said to have cut forecasts for global growth in 2008 and claimed that there's a 25% chance the world will fall into recession.
It has chopped its prediction for world economic expansion from the 4.1% announced in January to just 3.7%, the slowest pace since 2002, according to a document seen by financial news group Bloomberg.
Last July, the fund said it though the global economy would grow by 5.2% this year despite the US credit crunch.
The IMF, headquartered in Washington, is due to hold a press briefing on the world economic outlook in a week's time.
"The financial shock that originated in the US sub-prime mortgage market in August 2007 has spread quickly, and in unanticipated ways, to inflict extensive damage on markets and institutions at the core of the financial system,'' reads today's statement.
(Article continues below)Advertisement
"The global expansion is losing momentum in the face of what has become the largest financial crisis in the United States since the Great Depression."
The US is forecast to grow just 0.5% in 2008, down sharply from the 1.5% predicted at the start of the year, followed by 0.6% growth next year.
Expectations for growth in the 15-nation eurozone have been lowered to 1.3% from 1.6%, which the IMF said affords some easing of the European Central Bank's policy stance.
The ECB has kept its benchmark rate at 4%, refusing to follow its counterparts in the US and London who have lowered borrowing costs in the reaction to the economic slowdown.
