IMF says global growth to be weakest in five years

By Alister Bull and Glenn Somerville

WASHINGTON (Reuters) - The International Monetary Fund cut its 2008 forecast for world growth on Tuesday, warning the global economy will deliver the weakest performance in five years as U.S.-originated financial strains intensify.

The IMF said no country will entirely escape the fallout from a crisis in the U.S. subprime mortgage market, where loans made to less creditworthy borrowers were packed into securities by Wall Street firms and sold around the world.

Defaults are soaring on the loans and no one has a firm estimate on eventual losses. Banks are continuing to write down billions of dollars in projected losses, raising fears they will be reluctant to lend, which would further crimp economic expansion.

"It is a significant slowdown. It is a global slowdown, without any question," IMF chief economist Simon Johnson told a media briefing. He would not say the U.S. would tip into a recession, but the IMF made plain that it was braced for more bad news.

"The overall balance of risks to the global growth outlook is still tilted to the downside," the IMF said in an update to its semiannual World Economic Outlook released in October.

The IMF lowered its global 2008 growth projection to 4.1 percent from 4.4 percent.

CHINA STILL BOOMING

This would be the weakest performance since 2003, when world growth notched 3.6 percent, and reflects a marked slowdown from the 4.9 percent pace last year -- although emerging economies have held up so far and China has not faltered.