IMF Cuts 2008 Global Growth Forecast to 4.8%

U.S. growth forecast cut to 1.9%

The International Monetary Fund on Oct. 17 slashed its 2008 global economic growth outlook, warning that turbulence stemming from a crisis in the U.S. housing sector could crimp growth worldwide. The world economy is expected to expand 4.8% next year after a 5.2% pace projected for 2007, the IMF said in its twice-yearly World Economic Outlook report.

The downgrade comes in the wake of turmoil in global financial markets in August that prompted the IMF to reverse course after an unusual update in July in which it raised its 2008 global growth forecast to 5.2%.

The greatest threat to the world economy is the financial market unrest stemming from the high-risk U.S. subprime mortgage sector, where loans were given home buyers with poor credit histories, the IMF said. This has affected banks and lenders worldwide and made credit conditions more difficult.

With regard to growth in the U.S. the IMF sharply scaled back its forecast to a 1.9% pace in 2008 and said risks of recession have risen.

Even with the latest reduction, the IMF said the U.S.outlook is uncertain and that risks "are on the downside," with weakness in housing not fully offset by business and consumer spending.

Copyright Agence France-Presse, 2007

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