IMF warns of deep US recession

The current financial crisis will make a deep recession more likely in the United States, says an International Monetary Fund (IMF) report issued last night.

Data from the past three decades has led the IMF to conclude that banking downturns led to most periods of financial stress: “Financial turmoil characterised by banking sector distress are more likely to be associated with severe and protracted downturns than episodes of stress centred mainly in securities or foreign exchange markets.
 
“Based on a comparison of the current episode of financial stress with previous episodes, there remains a substantial likelihood of a sharp downturn in the United States.”
 
The IMF is likely to revise its economic growth forecasts ahead of the World Economic Outlook to be released next week.
 
IMF chief economist Simon Johnson, indicated there was still “a chance of a global recession”, which they define as growth of under three percent. In July, the IMF forecast global expansion at 4.1 percent this year and 3.9 percent in 2009.