U.S. GDP

The IMF projects that the U.S. GDP growth will slow to 1.5% in 2008, down from 2.2% in 2007. On a Q4 / Q4 quarterly basis (Q4 2007 to Q4 2008) which provides a better sense of the slowing growth momentum, growth is projected at 0.8% in Q4 2008, compared with 2.6% in Q4 2007.

Economist David H. Wang told BloggingStocks Tuesday, the revised IMF global growth projections reflect the United States' decidedly more-modest economic landscape, but that the world is still growing at a healthy rate.

"The [global growth rate] forecast reduction to 4.1% from 4.9% is a substantial slowing, but a 4.1% rate is still fast enough for markets to expand, economies to develop, and job creation to create to new opportunities for the citizens in those nations. It's a growth rate that's healthy for global businesses and living standards," Wang said. "However, it remains to be seen if the world can maintain 4% growth in 2008. The U.S. economic downturn will have much to say about that."

Wang underscored that most economists, for a variety of reasons, evaluate U.S. GDP and global GDP growth levels differently. For example, 3.0% growth in a developed economy such as the U.S. would be considered adequate growth. Conversely, that same 3.0% growth globally, "would be practically tantamount to recession levels, globally."

Hence, if/when global growth slips toward 3.5%, "that would be a danger sign regarding the health of the world's economy," he said.

The IMF also called the U.S. Federal Reserve's recent, emergency-meeting 75-basis-point reduction in key, short-term interest rates, "appropriate and helpful." (The Fed meets again Wednesday to discuss short-term interest rates in its regular-schedule meeting. Economists expect the Fed to cut rates by another 50 basis points.)

China's boom seen continuing

Further, IMF sees only a modest slowdown in China's surging economy in 2008, despite efforts by China's government to slow growth. China's GDP is expected to grow 10% in 2008, compared with 11.4% in 2007.

"China may end up playing a substantial role in maintaining adequate global growth, but let me add that we won't know China's growth engine capability until later this year. It remains to be seen whether China can maintain robust economic activity in Asia in the face of a slowing U.S. economy," Wang said, likening China's growth engine status to that of an untested engine in an Indianapolis 500 race car.

Meanwhile, Latin American economic growth is expected to slow to 4.3% in 2008 from 5.4% in 2007. The IMF also expects robust growth conditions to change little in Middle Eastern nations, with the region expected to register 5.9% GDP growth in 2008, as opposed to 6.0% in 2007.

Japan's economy is expected to grow 1.5% in 2008, down from 1.9% growth in 2007.

IMF added that monetary policy makers should also work towards "a convergence of practices" in the tools they use to manage liquidity, citing difficulty that central banks are having in communicating their actions and concerns. National and cross-border arrangements to share information and coordinate actions could also be strengthened, the IMF said. The IMF added that central banks will have to remain active to ensure sufficient liquidity in financial markets.