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IMF: US Recession Likely - 2001-09-26

The International Monetary Fund says the terrorist attacks in the United States will further depress world economic growth. But the IMF does not expect a global recession - or outright downturn in economic activity.

The IMF says global growth is much weaker than it was one year ago and that the terrorist attacks of September 11 will restrain growth even more.

Overall, the IMF says the world economy will have expanded by about 2.6 percent this year, a sharp decline from the nearly 5 percent growth of a year earlier. But according to the IMF's new chief economist, Harvard University professor Kenneth Rogoff, in spite the terrorist attacks, an improvement is expected in 2002.

"Our baseline for 2002 of 3.5 percent may or may not turn out to be correct," said Mr. Rogoff. "But regardless, it would take a significant further bad turn of events, beyond what we can envision at present, just to carry growth down to what was a global growth recession in 1990-1991 [during the Gulf war] where the levels dipped below 2 percent."

But Mr. Rogoff is not so optimistic concerning the United States, the world's biggest economy. He believes a recession is already underway in the United States. "The conventional recession of having two quarters of negative growth seems to be a significant likelihood, whether it will be above zero or a bit below zero, there will be a trough in U.S. growth over two quarters," he said.

Growth in the United States already slowed in the second quarter to an annual rate of .2 percent, the slowest growth in eight years. U.S. Treasury Secretary Paul O'Neill said Wednesday the terrorist attacks in New York and Washington will delay a rebound in U.S. growth by at least three months.

Separately, finance ministers of the seven richest industrial nations, the Group of Seven, will meet October 6 in Washington to discuss the global economy and terrorism. The ministers, plus central bank chiefs from Europe, the United States, and Japan, were to have met Friday, September 28 but that session was postponed because of the terror-related cancellation of the annual meeting of the IMF and World Bank.