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IMF: US in recession, 25-per-cent chance world will follow (Roundup)

Apr 9, 2008, 15:07 GMT

Washington - The United States economy is expected to enter a recession in 2008 and there is a 25-per-cent chance the rest of the world will follow suit, the International Monetary Fund forecast on Wednesday. A file photo of a shopper paying cash for a deeply discounted GPS device at a Wal-Mart store in Woodstock, Georgia 23 November 2007. The United States economy is expected to enter a recession in 2008 and there is a 25-per-cent chance the rest of the world will follow suit, the International Monetary Fund forecast 09 April 2008. EPA/ERIK S. LESSER/HO

A file photo of a shopper paying cash for a deeply discounted GPS device at a Wal-Mart store in Woodstock, Georgia 23 November 2007. The United States economy is expected to enter a recession in 2008 and there is a 25-per-cent chance the rest of the world will follow suit, the International Monetary Fund forecast 09 April 2008. EPA/ERIK S. LESSER/HO But the US recession, brought on by a crisis in the housing and financial markets, is a mild one that will likely have a lesser effect on global growth than in past down-cycles, according to the IMF's semi-annual World Economic Outlook report. Europe has been hit by the US slowdown as well as to a lesser extent Latin America, but emerging economies in Asia, Africa and the Middle East have all shown themselves to be largely resilient. A 0.7-per-cent contraction in US growth is expected to occur in the time period that started with the fourth quarter in 2007 and ends with the fourth quarter in 2008, the IMF said. But for fiscal 2008, overall growth could be a positive 0.5 per cent, the IMF said. In 2007, the US economy grew by 2.2 per cent. The slow growth is likely to continue at 0.6 per cent in 2009 and only return to 'above potential' in 2010, according to Simon Johnson, the IMF's chief economist. The IMF already confirmed last week, after leaked media reports, that it projects world growth to slow to 3.7 per cent in 2008 after growing at a 4.9-per-cent clip in 2007. There is a 25-per-cent chance that 2008 world growth will fall below 3 per cent, which the IMF would rate as a global recession. Johnson said there remained 'downside risks' to global growth due to the unpredictability of financial markets. The Washington-based institution in a separate report on Tuesday said banks could suffer losses of nearly 1 trillion dollars from the crisis. But the wider downturn is largely due to advanced economies struck by turmoil in financial and mortgage markets, which has in turn tightened lending practices and dampened consumer spending. Growth in the euro area is forecast to slow to 1.4 per cent in 2008 from 2.6 per cent in 2007. Central and Eastern Europe meanwhile will see growth slow to 4.4 per cent on the year compared to 5.8 per cent in 2007, largely due to lesser demand in its western neighbours. The European Central Bank - which has so far been reluctant to follow its US counterpart in lowering interest rates - could 'afford some easing of the policy stance' as the downturn was likely to dampen inflationary pressures in 2009, the IMF report said. Japan, though its financial institutions have so far escaped largely unscathed, will likely see growth slow to 1.4 per cent in 2008 from 2.1 per cent in 2007. The IMF said a decline in domestic spending and demand from the US and Europe could further dampen the outlook. Developing countries by contrast have not seen a significant economic slowdown. Subir Lall of the IMF's World Economic Studies Division said emerging economies were experiencing a 'divergence,' though not a 'decoupling' from industrial nations. Domestic demand has remained strong in China, India, Latin America and Africa, the IMF said. China will grow at a 9.3-per-cent clip in 2008, down from 11.4 per cent the year before but still well above long-term trends. India will grow by 7.9 per cent in 2008 after climbing 9.2 per cent in 2007. Brazil was one of the few countries which saw its 2008 growth forecast revised upwards to 4.8 per cent from the IMF's January estimate, still lower than the 5.4 per cent in 2007. Charles Collyns, deputy director of the IMF's research department said it was 'encouraging' that Latin America had been less affected by the US slowdown than in past crises. But the IMF warned that emerging economies are now faced with the twin challenge of keeping their distance from industrial nations' troubles while avoiding a strong uptick in inflation. Inflationary pressures have come from a surge in food, metal and energy prices, which the IMF sees as the greatest risk to the economic wellbeing of developing economies. 'Most likely there are continued inflationary and recessionary problems ahead for most of the IMF's 185 member countries,' Johnson said.

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billApr 9th, 2008 - 16:45:59

say what you want but we know this was caused by one man .
don't have to even metion is name .everyone knows .hats off to the man who single handed destroyed america..

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Your full of bull BillApr 9th, 2008 - 19:03:54

You can't blame just one politician, you have to blame all of the scum sucking, self-serving politicians. They grow wealthy while losing touch with the working class. Throw all the bums out of office every four years. Experience after all, has gotten us nowhere fast.

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Bill- you're a moronApr 9th, 2008 - 20:44:28

What a moron that one would even blame one person for this.

What about all the lending companies that suckered most of the ignorant American population into mortgages they couldn't afford in the first place so their numbers could look good

-or-

the fools that don't understand what they are commiting to. I am 25 and would NEVER get into a ARM, even before any of this mess started. It's called common sense. Looks like the good ole American Dream is bitting them in the you know what...

Also what about the oil companies that keep raising gas prices and are still making record profits as the country spirals into more and more debt...

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billApr 9th, 2008 - 21:08:34

i might be a moron but after i did time in nam i know a bad president when i see one who is killing all our troops for nothing but to make him richer wake up dummies,,,

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ParkerApr 10th, 2008 - 03:29:35

He might not be the only cause of the problems, but he sure as he** contributed more than his share toward them!

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