IMF-World Bank meetings start as US recession expectations intensify

The United States is headed for a recession, dragging world economic growth down along with it, the IMF concluded in a sobering new forecast on Wednesday that underscored the damage inflicted from the housing and credit debacles.         Â

The IMF's World Economic Outlook served as a reminder of just how swiftly economic and financial fortunes in the United States and beyond can unravel, affecting people, investors and businesses around the globe. The fund slashed growth projections for the United States - the epicenter of the woes - and for the world economy. The fragile state of affairs greatly raises the odds that the global economy could fall into a slump, the IMF said.

Financial problems that erupted in August 2007 "spread quickly and unpredictably" and caused "extensive damage," the IMF said. It described the financial shock as the biggest "since the Great Depression."

Economic growth in the United States is expected to slow to a crawl of just 0.5 percent this year, which would mark the worst pace in 17 years, when the country had suffered through a recession. The United States will not fare much better next year; the IMF projected the U.S. economy will grow by a feeble 0.6 percent in 2009, when measured by an annual average.

"The U.S. economy will tip into a mild recession in 2008 as the result of mutually reinforcing cycles in the housing and financial markets," the IMF said.

The IMF expects Turkey's gross domestic product growth as four percent in 2008, and 4.3 percent in 2009. According to the report, Turkey's consumer inflation on the basis of annual averages was predicted as 7.5 percent in 2008, and 4.5 percent in 2009. The IMF predicts Turkey's current account deficit according to gross domestic product at 6.7 percent for 2008, and 6.3 percent for 2009, according to the report.

Looking at other countries, the IMF trimmed its projection for Germany, with economic growth slowing to 1.4 percent this year and weakening to one percent in 2009. In Britain, growth will slow to 1.6 percent this year and next. France also will see growth decelerate to 1.4 percent this year and 1.2 percent next year.

Global powerhouse China, which barreled ahead at an 11.4 percent pace last year, would see growth moderate to 9.3 percent this year and then strengthen slightly to 9.5 percent the following year. India, which grew by a blistering 9.2 percent last year, is expected to grow by 7.9 percent this year and 8 percent the next. Russia, which logged growth of 8.1 percent last year, will see growth moderate to 6.8 percent this year and then 6.3 percent the following year.

Many private economists and members of the U.S. public believe the country has already fallen into its first recession since 2001. For the first time, Federal Reserve Chairman Ben Bernanke acknowledged last week that a recession was possible.

The IMF now expects the world economy, which grew by a robust 4.9 percent last year, to slow sharply. The fund is projecting the global economy to grow by 3.7 percent this year and 3.8 percent the next year.

There is a risk that things could turn worse, it cautioned.

"The IMF now sees a 25 percent chance that global growth will drop to three percent or less in 2008 and 2009 - equivalent to a global recession," the fund said. "The greatest risk comes from the still-unfolding events in financial markets, particularly the potential for deep losses" on complex investments linked to the U.S. subprime mortgage market, the IMF said.

The sober IMF forecast comes days before the United States and other top economic powers are slated to meet Friday to discuss the problems and ways to deal with them. The IMF and the World Bank talks are expected to carry over into weekend meetings in Washington.