IMF again cuts 2008 global growth forecast on credit crunch ripples

In its current assessment, the IMF said the credit crunch that started in the subprime mortgage market has spread quickly, and in unexpected ways, and that "the global expansion is losing momentum" Bloomberg reported, citing the IMF document.

Economic Analysis: A decidedly negative forecast for the global economy. Prior to this year, arguments had surfaced in economists' circles regarding 'decoupling' -- the thesis that the global economy was no longer as closely linked to the U.S. economy, and, by extension, would survive any U.S. slowdown relatively unscathed. With this document the IMF is arguing that it's not in the decoupling camp, and, more importantly, it sees serious global economic implications from the U.S. slowdown/recession.

Further, the IMF's forecast of a 25% chance that global growth could drop below 3% in 2008 and 2009 amounts to a warning that emerging market growth could fall to sub-par levels. Unlike developed nation economies, most emerging markets should grow at rates above 4%, in order speed basic-needs development and increase real incomes. A sub 3.5% global growth rate would suggest an inadequate growth rate in much of the developing world -- an unacceptable condition for nations, investors, business executives and, citizens alike.