IMF World Economic Outlook update predicts growth decline

29 January 2008

An IMF update of the key WEO projections states that the global economic expansion has begun to moderate in response to continuing financial turbulence. Global growth is projected to decelerate from 4.9 percent in 2007 to 4.1 percent in 2008, a markdown of 0.3 percentage point relative to the October 2007 World Economic Outlook. Risks to the outlook remain tilted to the downside.

 

Recent data suggest that global growth slowed markedly in the final quarter of 2007 in the face of significant headwinds from the financial sector, following a stronger than expected third quarter. The financial market strains originating in the U.S. subprime sector—and associated losses on bank balance sheets—have intensified, while the recent steep sell-off in global equity markets was symptomatic of rising uncertainty.

 

Economic growth in the United States slowed notably in the fourth quarter, with recent indicators showing weakening of manufacturing and housing sector activity, employment, and consumption. Growth has also slowed in western Europe, and confidence indicators have generally deteriorated. In Japan, growth has been dampened by a tightening in building standards, while consumer and business sentiment has weakened.

 

WEO update

© International Monetary Fund