World economy outlook uncertain

Source: Exec Digital USA

Date :10/23/2007 3:54:13 AM

The head of the International Monetary Fund has reported the global economy continues to face a period of uncertainty.

Spain's Rodrigo de Rato said recent turbulence in credit markets, the worst in a decade, is a warning that the continually expanding global economy of recent years cannot be taken for granted.

"We still do not know the full extent of the decline in the house market and the subprime problems of the U.S. economy," he said, referring to risky mortgages made to borrowers in the U.S. with spotty credit or low income.

He said further disruption in financial markets and further falls in housing prices could lead to a global economic downturn, making other risks — rising food and oil prices, a falling dollar — loom larger.

As a result of the turbulence, he said the IMF expects "a slowdown in growth but not a recession in the United States, and a smaller slowdown in other advanced economies."

De Rato spoke at the closing meetings of the IMF and its sister institution, the World Bank. It was his last address to the group; he is stepping down as the head of the 185-nation lending organization after 3 1/2 years. His successor, France's Dominique Strauss-Kahn, takes over Nov. 1.

He said over the past few months the world has lived through an earthquake in credit markets.

"Like most earthquakes, it has been something distant for most people, something they read about in the newspapers. But there is still a risk of aftershocks, and the full effects of the disruption we have already had will only be felt over time."

The Group of 24 developing countries noted wryly in their communique that, for once, a financial crises began in one of the advanced nations instead of in Asia or Latin America, as has happened in the past.

October 23 2007