Katrina Shankle/Feb. 1, 2008/2:37 p.m./Global Economics
The International Monetary Fund has cut its global growth forecast for this year in preparation for the chain reaction triggered by the credit crunch that seized the global economy six months ago. This is the weakest expansion prediction since 2003 and is due in large part to the sub-prime meltdown in the U.S. and the tougher lending standards that have resulted. The meltdown has curbed the spending in the West and led to a knock-on effect export dependent economies of Asia. This is the second time in three months that the International Monetary Fund has cut its forecast for 2008. The prediction in October was for a 4.8 percent expansion for 2008 to continue the longest period of sustained growth rate since the late 1960s and early seventies. The 4.8 percent expansion was later downgraded to a 4.4 percent expansion after higher inflation over the last decade in the emerging economies of India and China thus meaning their growth had not been as fast as originally thought.
The three large economic blocs of the West: U.S., Japan, and the eurozone have had their growth predictions reduced. The International Monetary Fund stated that the US GDP would increase 0.4 points lower than expected, at 1.5 percent in 2008. The eurozone has an expected expansion of 1.6 percent, 0.5 lower than originally predicted while the Japanese economy is predicted to grow by 1.5 percent as opposed to last fall’s 1.7 percent growth.
This is a prime example of how an occurrence in one country can effect the global neighborhood as a whole.
http://www.guardian.co.uk/business/2008/jan/30/worldbank.economics
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