Global Recession Forecasted

In International Monetary Fund (IMF) semi-annual World Economic Report released on 9 Apr 08, they warn that there is now a 0ne-in-four chance of a global recession. IMF also declare that the United States faces a recession this year.

The report said : "The financial market crisis that erupted in August 2007 has developed into the largest financial shock since the Great Depression, inflicting heavy damage on markets and institutions at the core of the financial system."

It also predict that global growth would slow to just 3.7 per cent this year while US economy will expand by just 0.5%. "The US is projected to tip into a mild recession in 2008 despite aggressive rate cuts by the Federal Reserve and timely implementation of a fiscal stimulus package." This would be the worst performance for the US economy for well over a decade.

Unless the global financial crisis worsens, Asia is set for slower yet still robust economic growth of about 4.0%, especially in newly industrialised economies of South Korea, Taiwan, Hong Kong and Singapore.

The IMF estimated that the worldwide losses stemming from the US sub-prime mortgage crisis could hit US$945 billion.

In a seperate report, ex-Federal Reserve chairman, Alan Greenspan, says US is already in recession.

The big cut in its most important interest rate capped the most aggressive Fed intervention in 25 years could help avoid a deep recession. The Fed has been urgently moving to prevent the trio of economic woes - housing, credit and financial - from plunging the country into a deep recession.

However, with the scoring energy prices and high food cost,, worry is that inflation could potentially become unhinged. If people, investors and businesses expect prices to rise sharply, they will act in ways that will make inflation worse.