The International Monetary Fund has slashed its estimate of Italy’s 2008 economic growth, a source familiar with the matter told Reuters on Friday.
When the IMF publishes its World Economic Outlook report on April 9, it will say it forecasts Italy’s GDP to grow just 0.3% this year, down from a previous forecast made in October of 1.3%, the source said. “The euro zone figures have been reduced further, consequently the 2008 growth forecast for Italy has been cut significantly to about 0.3%,” the source said. The IMF will also say the economy of the 15 countries using the euro will grow less than 1.3% this year, the source said.
The chairman of the group of euro zone finance ministers, at a meeting in Brdo, Slovenia, rejected the forecast. “I’m not even in agreement on the 0.3% for Italy,” Jean-Claude Juncker told reporters. On April 2, a European Union source said the IMF would forecast euro zone growth to slow to 1.3% this year because of financial market turmoil, a sharp slowdown in the United States, expensive oil and a strong euro. In January, the IMF estimated 2008 euro zone growth would be 1.8% -- a similar view to the European Commission’s. The IMF cut its 2008 outlook for world economic growth for the second time this year on Thursday, acknowledging that housing and credit problems in the United States were exacting a heavy toll on the global economy.
The IMF said it expects the pace of global growth to slow to 3.7% this year, down from its January forecast of 4.1% and lower still than the 4.8% rate it predicted in October last year. The latest revision puts world growth at its lowest since 2002, when it was 3.1%, according to IMF data. On Thursday, IMF Chief Economist Simon Johnson said the US economy had come to “a virtual standstill” and would remain weak in coming quarters owing to deeper problems in housing and credit markets. But Johnson avoided saying the United States was in recession. Media have reported that the IMF growth outlook will put US economic growth for 2008 at 0.5% from a previous forecast of 1.5%.
Speaking before the release of the twice-yearly World Economic Outlook, he said economic growth in Europe would also slow this year, perhaps with some lag, because of the United States’ weak performance. He said the possibility of deeper and more protracted strains in financial markets posed the biggest threat to the world economy, with growth in major emerging economies also likely to weaken, although it should stay above trend. Johnson said Europe was particularly vulnerable to financial spillovers from deeper credit market problems in the US, while a possible correction in some of Europe’s housing markets could weigh on consumption and consumer confidence. (Reuters)