The International Monetary Fund (IMF) said Thursday it has adjusted its forecasts for the global economic growth in 2008 downward to below 4 percent, with a growth of just above 9 percent for the Chinese economy.
The recovery in the global economy will also come slower than a previous projection put forward by the IMF six months ago, said Olaf Unteroberdoerster, IMF's resident representative in the Hong Kong Special Administrative Region.
"The outlook for the global economy today is much worse than it was a year ago," he said at a luncheon at the Hong Kong General Chamber of Commerce.
Unteroberdoerster said the world economic growth would be below 3 percent in 2008 and did not rule out a global repression.
The world economy averaged a growth of 4.9 percent in 2007, down 0.1 percentage points from the previous year and the IMF has projected a growth of 3.7 percent in its forecasts announced in mid-April. China had a growth of 11.4 percent in 2007.
Unteroberdoerster said the advanced economies, such as the United States and the European Union, were most affected by the current financial turbulence.
"If you look at the housing sector in the United States, it is obvious that there is no signs of a recovery yet," he said, adding that the influence of the financial turbulence may well be carried into 2009 and thereby slow down the year's growth.
But the emerging economies remained the most dynamic as they expected a growth that would be slower in 2008 but still above the trend growth over the last decade, he said.
Unteroberdoerster said the advanced economies and the emerging economics have diverged over the recent years but not de-coupled. The advanced economies experienced a slowdown since 1970 while the emerging economies has been picking up momentum after their growth slowed down to about the same level as the advanced ones around 1990.
China, which has had a rising exposure to demand from the United States and the EU over the past decades, will grow at just above 9 percent in 2008. India, less exposed to demand from the advanced economies, will be less affected by the slowdown, he said.
"Asia's financial exposure to the United States has also risen. As a result, growth has become more synchronized, as has financial market performance," he said.
Unteroberdoerster said the risks were still tilted to the downside, mainly because the end of the housing market downturn in the United States did not seem near and the inflation pressures across the world economies were raising concerns.