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IMF sees recession risk
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August 31, 2001: 8:57 a.m. ET
Report: Latest outlook cuts growth forecast, sees risk of global recession
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NEW YORK (CNNfn) - The International Monetary Fund warns of "significant danger" of a global economic recession in its latest World Economic Outlook, according to a published report Friday.
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U.S. GDP has slowed to a crawl, putting the rest of the world at risk of a recession. | |
The IMF said it expects world economic growth of 2.8 percent in 2001, but the U.S. economic slowdown could lead to "a much deeper and more protracted global downturn," according to a report in the Financial Times, which said it obtained a leaked draft version of the IMF document. A final version is scheduled to be published at the end of September.
The IMF did not change its outlook for 1.5-percent economic growth for the United States – which has the world's largest economy – in 2001 and 2.5-percent growth in 2002, according to the Times, but said disappointing productivity growth could sink already falling U.S. stock markets, cutting spending by businesses and consumers.
Consumer spending fuels two-thirds of the U.S. economy, and the U.S. Federal Reserve has cut its target for short-term interest rates seven times this year in an effort to keep consumers spending and avoid a recession, often defined as two consecutive quarters of negative gross domestic product (GDP).
So far, the United States has apparently avoided a recession, but Thursday's government report of meager personal spending indicated consumers are wary about the outlook for the economy.
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The IMF thinks a recession in the United States would be especially hard on the rest of the world because of weakness in Japan and Europe, the Times said. The IMF said Japan is in a recession and expected that nation's economy to shrink by 0.2 percent in 2001, and to grow by 0.6 percent in 2002.
In April, the IMF said it expected 3.2-percent global economic growth in 2001, but cut that number in its latest outlook, the Times said. The report did not say whether or not the IMF had trimmed its prediction of 3.9-percent growth in 2002.
The IMF, funded by the treasuries of industrialized nations, tries to help developing nations with their debt, lower trade barriers and stabilize currencies. 
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