IMF lowers outlook for global economic growth

Washington, January 28, SPA --The world economy will essentially come
to a halt this year as more than $2 trillion of bad assets clog the
financial system, AP quoted the International Monetary Fund as saying
today.

The global economy will grow by only 0.5 percent this year, the IMF
said. That would be the slowest pace since World War II and is a
sharp reduction from the IMF's projection of 2.2 percent growth in
November.
The IMF also raised its estimate of the total losses for banks and
other financial services companies stemming from bad loans in the
United States to $2.2 trillion, from $1.4 trillion in October.
The ongoing financial crisis is restricting credit for companies and
consumers, and is the primary reason the global economy is in dire
straits, the IMF said in two reports.
«A sustained economic recovery will not be possible until the
financial sector's functionality is restored and credit makers are
unclogged,» the IMF said.
Governments should take several steps to address the crisis,
including injecting capital into «viable institutions» and «carving
out bad assets» from banks, according to the IMF.
Despite efforts such as last year's $700 billion financial rescue
program in the U.S. and similar steps overseas, «risks to financial
stability have intensified since October,» the IMF said.
The U.S. economy will shrink by 1.6 percent this year, according to
the IMF's updated World Economic Outlook.
That's a sharper decline than the 0.7 percent dip forecast in
November.
The 16 European nations that use the euro currency will see their
economies shrink by 2 percent this year, while Japan's economy will
contract by 2.6 percent, according to
the new IMF forecast.
--SPA
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