Financial markets strains originating in the US subprime sector — and associated losses on bank balance sheets — have intensified, and the recent steep sell-off in global equity markets was symptomatic of rising uncertainty. While projecting growth of above 4 per cent for the global economy, the International Monetory Fund says there is a risk that the ongoing turmoil in financial markets would further reduce domestic demand in the advanced economies with more significant spillovers into emerging market and developing countries.
Economic growth in the United States appears to have slowed notably in the fourth quarter of 2007, with recent indicators showing, weakening of manufacturing and housing sector activity, emplyment and consumption. Emerging markets will, however, continue to clock robust growth.
