The International Monetary Fund on Tuesday slashed its forecast for US growth and warned that no country would be immune from what it termed a “global slowdown”. The Fund said global growth would fall from 4.9 per cent in 2007 to 4.1 per cent this year, 0.3 percentage points lower than it forecast in October according to the Financial Times.
US growth would fall from 2.2 per cent to 1.5 per cent, with the eurozone slowing from 2.6 per cent to 1.6 per cent.
Simon Johnson, the IMF’s chief economist, said emerging markets would continue to be “the engine of global growth” but said “here too we expect growth to slow this year”, from 7.8 per cent last year to 6.9 per cent this year.
“Reports of decoupling have been greatly exaggerated,” Mr Johnson said. The slowdown in the US was spilling over into Europe and would affect emerging nations’ exports, he added.
“It is going to be a story of how are you linked to the US and to what extent can your policies deal with the repercussions.”
He said emerging economies would be affected by classic “trade linkages” but so far seemed to be relatively insulated from “financial linkages”. By contrast, European economies would be affected by trade and financial linkages.
Mr Johnson said that all economies needed to be “alert to signs of a sharper global downturn”. Nations with sound structural positions should be prepared “to apply counter-cyclical policies if conditions warrant”.
Read it here: IMF slashes US growth forecast