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Market turmoil will affect world growth, says IMF

Market turmoil will affect world growth, says IMF
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The International Monetary Fund says the world’s economy will grow by 5.2 per cent this year.

Last year, growth was a brisk 5.4 per cent.

The forecast for 2008 was downgraded by nearly one half a percentage point from this summer’s outlook, reflecting the strain on financial markets.

Simon Johnson, director of the IMF’s research department, said the principal risk to the outlook was the impact of market turmoil.

“The principle risk going forward is that prolonged disruptions in financial markets and a possible weakening of asset prices, including, but not limited to housing prices and confidence, could have a more severe impact on economic activity than anticipated in our baseline projections.”

The IMF says growth will even out to 4.8 per cent in 2008.

It lowered its forecast for US growth, predicting that the economy would expand by just 1.9 per cent this year and next.

This reflects the impact of the worst housing slump in 16 years and the effects of the current credit crisis.