IMF lowers forecast for world growth

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The International Monetary Fund is preparing to cut its estimate for world economic growth. Leaked reports of the IMF's forecasts show it has revised down 2008 projections to 4.8 per cent, from 5.2 per cent.

Much of that is down to the gloomier prospects for the United States economy – a quarter of global economic activity – with a drop to 1.9 per cent, compared with 2.8 per cent it expected for the US in July.

The UK's projected growth for 2008 has been cut from 2.7 per cent to 2.3 per cent, according to leaks of the forthcoming official IMF reports. The IMF also reduced its 2008 forecast for the 13 countries in the eurozone to 2.1 per cent from 2.5 per cent. Such downgrades follow a similar reassessment of near-term prospects by the OECD last month.

Speaking on the record yesterday, the IMF's chief economist said that the repercussions from recent market turmoil should be contained within the advanced economies, with growth in emerging markets such as China and India likely to remain broadly on track.

"The immediate impact on global growth should be modest and, as I see it, the repercussions are likely to be contained within the advanced economies," Simon Johnson told a news conference. "The global expansion should continue, albeit at a somewhat slower pace."

Mr Johnson believed the recent turmoil in credit and money markets provided a major test for global financial stability. "Events remain fluid," Mr Johnson said, adding that short-term risks had clearly risen.

Few countries escaped the IMF's new pessimism. The IMF has pared back its economic growth forecasts for Germany to 2 per cent from 2.4 per cent, and to 2 per cent from 2.3 per cent for France. However, China may hardly notice the difference, with a predicted 10 per cent growth rate, down from 10.5 per cent.