International
IMF says global economy is poised for the fifth straight year of robust economic growth; Irish GDP to fall from 5% in 2007 to 3.7% in 2008
By Finfacts Team
Apr 11, 2007, 15:30

The International Monetary Fund said today that the world economy is poised  for a fifth year of 'robust' growth but faces problems from a US housing slowdown and instability on financial markets.

In its Spring World Economic Outlook report, the IMF said global  growth would moderate both this year and next to 4.9%, down from 5.4% in 2006.

The Eurozone will overtake economic growth in the US for the first time since 2001, although both regions are expected to slow later this year, the IMF said. I

The IMF forecasts that Ireland's GDP growth will be 5% in 2007, falling to to 3.7% in 2008. It said Irish unemployment would rise to 4.5% this year and 4.7% in 2008, but inflation would moderate.

The report said Japan would extend its recovery from a long slump while China and  India would lead developing nations' growth.

The IMF said that the US economy, the world's largest economy is slowing, but so far the downturn appears to be a 'midcycle pause' rather than a full-blown recession.

The Fund forecasts that the US economy will grow at about 2.2% this year, almost a quarter slower than the 2.9% forecast in late 2006.

Despite the adjusted forecast, 'a growth pause still seems more likely at this stage than a recession,' the IMF said in its semi-annual World Economic Outlook.

While US economic growth has been slowing, the IMF says that it will recover in the second half of the year, increasing to 2.8% in 2008.

The IMF said the continued weakness in the US housing sector is a driving force behind the lowered output expectations.

'With the stock of new homes rising to its highest level in over 15 years, home construction is falling more sharply than previously expected as homebuilders move to reduce their existing inventory,' the IMF said.

The US economy is currently in the midst of what Fed Chairman Ben Bernanke termed 'a substantial housing correction' that has included serious problems with high risk mortgages in the  subprime lending sector.

'The deterioration in credit quality in the subprime mortgage market could spread to other market segments in a weaker housing environment, adversely affecting the financial sector and credit availability,' the IMF said.