World growth to 'resist US blip'

Helping to offset any problems will be strong growth in nations such as China, and a recovery in Japan and Europe.

The US is the world's largest economy and has shown signs of slowing as a weaker housing market has dampened consumer confidence and spending.

However, the IMF said that the problems were US specific and should not spread.

"Most countries should be in a position to decouple from the US economy and sustain strong growth if the US slowdown remains moderate as expected," the IMF said in its World Economic Outlook report.

Spill over

According to the IMF, the US economy will now grow by 2.6% in 2007 and by 3% in 2008.

That is a slower rate of growth than the IMF predicted in September and reflects the increased problems in the US housing market.

Since the turn of the year, problems with the sub-prime mortgage market have further fanned fears about a slump in house prices.

Sub-prime lenders provide mortgages to people with poor or non-existent credit histories, and higher interest rates have pushed defaults to a record level.

The worry for the IMF is that while the effects of these problems have been limited, should they spread then their impact on other nations could become far greater.

"With the US slowdown to date largely driven by the cooling domestic housing market, spillovers to growth elsewhere have been limited," the IMF said.

"If the housing market downturn spread to consumption and business investment, however, then cross-border spillovers could be significantly larger," it warned.

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