The International Monetary fund has slashed odds that the world is facing a financial recession and admits that the U.S. is in its worst economic crisis since the Great Depression, as the body revised forecasts for economic slowdown.
The Washington-based lender gave a 25 percent chance that global growth will drop to 3 percent or less this year or next, a figure described s equivalent to a global recession.
The forecast marks the third time the IMF has reduced projections for economic growth since July, with chances of a harsh global recession becoming increasingly likely.
"The financial shock that originated in the U.S. subprime mortgage market in August 2007 has spread quickly, and in unanticipated ways, to inflict extensive damage on markets and institutions at the core of the financial system,” the statement said. "The global expansion is losing momentum in the face of what has become the largest financial crisis in the United States since the Great Depression,” states the report.
"The IMF’s forecast is now below the world economy’s longer- term trend so there is certainly some significance in what it is now seeing,” said Andy Cates, a global economist at UBS in London told Bloomberg News. "The world economy is slowing quite considerably and will be very different from what we’ve become accustomed to.”
Roger Nightingale, global strategist at Pointon York Ltd. in London, said the IMF were behind the curve in only just beginning to discuss what is already unfolding.
"The IMF only really forecasts these things after they’ve begun,” he told Bloomberg Television. "You’ve got America, Italy and several other European countries and one or two Asian countries, actually in or very close to recession, and yet the IMF just now begins to talk about this phenomenon."
The IMF’s prediction follows a report by the Congressional Budget Office in Washington, which suggests that "In the fiscal year starting in October, 28 million people in the US will be using government food stamps to buy essential groceries, the highest level since the food assistance programme was introduced in the 1960s."
A story about the dismal forecast by the London Independent entitled, USA 2008: The Great Depression, describes how getting food on the table "is a challenge many Americans are finding harder to meet."