IMF sees US falling into recession, dampening global economic growth

WASHINGTON -- The United States is headed for a recession, dragging world economic growth down along with it, the International Monetary Fund concluded in a sobering new forecast Wednesday that underscored the damage inflicted from the housing and credit debacles.

The IMF's World Economic Outlook served as a reminder of just how swiftly economic and financial fortunes in the U.S. and beyond can unravel, affecting people, investors and businesses around the globe. The fund slashed growth projections for the U.S. -- the epicenter of the woes -- and for the world economy. The fragile state of affairs greatly raises the odds that the global economy could fall into a slump, the IMF said.

Financial problems that erupted in August 2007 "spread quickly and unpredictably" and caused "extensive damage," the IMF said. It described the financial shock as the biggest "since the Great Depression."

Economic growth in the U.S. is expected to slow to a crawl of just 0.5 percent this year, which would mark the worst pace in 17 years, when the country had suffered through a recession. The U.S. won't fare much better next year; the IMF projected the U.S. economy will grow by a feeble 0.6 percent in 2009, when measured by an annual average.

"The U.S. economy will tip into a mild recession in 2008 as the result of mutually reinforcing cycles in the housing and financial markets," the IMF said.

David McCormick, the Treasury Department's point person on international affairs, called the IMF's projections "unduly pessimistic."