Market turmoil triggers IMF to slash growth outlook

Buy an ad on DigitalJournal.com

The International Monetary Fund has slashed its global economic growth forecasts, IMF sources confirmed Tuesday, amid fears about ongoing turbulence in the world financial markets.

Instead of 5.2 per cent, the IMF now expects the global economy to expand next year by 4.8 per cent with US growth to come in at 1.9 per cent, down from a previous estimate of 2.8 per cent.

The IMF move to revise its down its growth forecast come as part of the buildup to the institute annual general meeting set down for Washington later this month.

It also follows a rounds of financial market turbulence in the wake of signs of a credit crunch as a result of the US housing industry crisis.

At the same time, the IMF expects the 13-member eurozone's rate of expansion to slip to 2.1 per cent from a previous forecast of 2.5 per cent. Growth in Japan is tipped to come in at 1.7 down from 2.0 per cent.

Germany is now tipped to chalk up a two-per-cent growth rate next year after the IMF raised its forecast for Europe's biggest economy from 1.9 per cent to 2.4 per cent in July.

Likewise, China's rapid economic growth, which has been a key driving force behind the recent global economic expansion is projected to slip back a gear in 2008.

The IMF has trimmed its growth forecast for China by 0.5 per cent and now expects the Asian powerhouse economy to expand by 10 per cent next year. dpa amc ds