The International Monetary Fund cut its forecast for global growth this year and said there's a 25 percent chance of a world recession, citing the worst financial crisis in the US since the Great Depression.
The world economy will expand 3.7 percent in 2008, the slowest pace since 2002, according to the "IMF Background Paper on the Update of the Global and Regional Outlook". In January, the fund projected a growth of 4.1 percent.
The IMF also forecast China would grow 9.3 percent this year, slower than the 10 percent projection made in January.
It's the third time the Washington-based institution has cut its forecast for 2008 after downplaying the threat of a US credit squeeze to the world economy last July, when it predicted a 5.2 percent expansion this year. Central banks will need to conduct policy "as flexibly" as the circumstances warrant, the statement said, adding that the European Central Bank has room to lower borrowing costs.
"The financial shock that originated in the US subprime 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," the statement said. "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 IMF gave a 25 percent chance that global growth will drop to 3 percent or less in 2008 and 2009, a pace the fund described as equivalent to a world recession.
The fund lowered its forecast for US economic growth to 0.5 percent this year, according to the document, below a 1.5 percent prediction made in January. The world's biggest economy will expand 0.6 percent in 2009, it said.
The euro region will expand 1.3 percent in 2008, the document said, down from the fund's 1.6 percent projection in January.
Source:China Daily/Agencies
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