In what would seem to be a contrarian view, given the number of economists forecasting a US recession this year, the International Monetary Fund (IMF) says no, the US economy will have slower growth in 2008, but won’t fall into recession. That US slowdown will also be a drag on worldwide economic growth, the IMF said.
US economic growth is now projected at 1.5% in 2008, down from 2.2% in 2007. The IMF’s economists see worldwide growth of 4.1%, down from 4.9%.
Not surprisingly, the IMF points to weakening of manufacturing and housing sector activity, employment and consumption as drags on the US economy. But the report called the recent three-quarters of a point rate cut by the Federal Reserve “appropriate and helpful.” (That was before yesterday’s additional half-point cut.)
It will be a bit tricky, but the IMF is optimistic that the Fed and the folks who set monetary policy in other countries can keep the world economic train on track. “Monetary policy faces the difficult challenge of balancing the risks of higher inflation and slower economic activity, although a possible softening of oil prices could moderate inflation pressures,” the IMF said.