IMF says U.S. heads for recession

By Lesley Wroughton

WASHINGTON (Reuters) - The U.S. economy is headed for recession this year and there is a 25 percent chance world growth will drop to 3.0 percent or less, a level that would be considered recessionary, the International Monetary Fund said on Wednesday.

The IMF said the global expansion of the last five years was fast losing ground in the face of a major financial crisis brought on by a downturn in the U.S. housing sector that continues "full blast."

The IMF's latest World Economic Outlook put world growth at 3.7 percent this year, the second time in four months the global watchdog cut its forecast.

In October, it had looked for growth of 4.8 percent, a forecast it had lowered to 4.1 percent in January to try to account for the world's fast-spreading credit woes.

The IMF sees only a bit of a pick-up next year, with growth reaching 3.8 percent, somewhat slower than that following the 2001 U.S. recession.

In the United States, growth in economic output will skid from a subpar 2.2 percent in 2007 to a bare-bones 0.5 percent this year and 0.6 percent in 2009, the Fund said.

But U.S. Treasury's Undersecretary for International Affairs, David McCormick, said the IMF's forecast for the United States was "unduly pessimistic," also acknowledging that a "significant downturn was underway.

"Those numbers, in terms of the outlook for the United States in 2008 and 2009, as well as the outlook for other regions around the world were significantly below consensus," McCormick told a news conference.