IMF cuts economic growth forecast

The IMF partly blames low consumer confidence for the shrinking economies

The International Monetary Fund (IMF) has become even gloomier about the prospects for the world's economies.

It is predicting that developed economies as a whole will shrink by 0.3% next year, having predicted growth of 0.5% less than a month ago.

It would be the first time there has been an overall contraction in developed economies since World War II.

Worst hit will be the UK, shrinking 1.3%, followed by Germany at 0.8% and the US and Spain contracting by 0.7%.

Emerging economies have also been downgraded, with the forecast of Chinese growth down from 9.3% to 8.5%, India down from 6.9% to 6.3% and Russia down from 5.5% to 3.5% growth.

The IMF is still expecting the overall global economy to grow in 2009, but it has cut its growth forecast to 2.2% from the previous estimate of 3%.

Financial crisis

"Prospects for global growth have deteriorated over the past month, as financial sector deleveraging has continued and producer and consumer confidence have fallen," the IMF said in its report.

The IMF has also cut its 2009 forecast for average oil prices from $100 to $68 a barrel, reflecting the recent slump in prices.

However, the IMF welcomed the action that governments have been taking to cushion the impact of the financial turmoil.

"The forceful policy responses in many countries have contained the risks of a systemic financial meltdown," it said.

"Nonetheless, there are many reasons to remain concerned about the potential impact on activity of the financial crisis."