The International Monetary Fund predicted Wednesday that the global economy will grow this year and next, but a credit crunch that has caused problems in financial markets was reflected in the report's revision downward of growth for next year. In its latest World Economic Outlook, the IMF said the global economy would grow by 5.2 percent this year and moderate to 4.8 percent in 2008. The forecast for this year, which is unchanged from a July projection, would be slightly slower than last year's 5.4 percent global growth. Next year's forecast was downgraded by almost one-half percentage point from early prediction, reflecting the expected effect of financial market strains. The IMF said the lower projection would still be a “solid” performance. “Risks to the outlook, however, are firmly on the downside, centered around the concern that financial market strains could deepen and trigger a more pronounced global slowdown,” the institution warned. The report included a lowering of the forecast for U.S. growth. It predicts the economy will expand by just 1.9 percent this year and next, as a result of a crisis in the housing markets and the credit crunch. The IMF said the risks of a U.S. recession “have risen,” but it was more likely that the economy would experience a “prolonged period” of slow growth. In Europe, the IMF forecast that economic growth in Germany will slow to 2.4 percent this year and then 2 percent next year, while Britain will see growth pick up to 3.1 percent this year and slow to 2.3 percent in 2008. Japan is expected to see growth slow to 2 percent this year and then 1.7 percent next year and China is forecast to see growth of 11.5 percent this year and 10 percent in 2008. The report said India should see growth of 8.9 percent this year and 8.4 percent next year and growth in Russia this year should accelerate to 7 percent and moderate to 6.5 percent next year. These three countries - China, India and Russia - “have accounted for one-half of global growth over the past year,” the IMF said.
