UN reduces world growth for this year

The United Nations (UN) has cut its forecast for world economic growth this year as a result of the deterioration of the US housing market and the credit crunch.

It is re-forecasting that global gross domestic product will grow by just 1.8 percent in 2008 compared to the initial forecast of 3.4 percent four months ago which was still down from the 3.8 percent achieved in 2007.

The UN also expect that there will be a continued lag in the world economy, extending into 2009.

They revealed that the revision itself has signalled that a continuation in the reduction of equity values in the housing market will make the credit condition worse which could then bring the world economy to a virtual standstill.

Following the report, the UN has also revised its January forecast for US economic growth in 2008 to -0.2 percent from 2.0 percent, whilst the forecasts were also lowered for European Union and Africa.

The UN chief economist Robert Vos indicated that the trigger for the reduced forecasts were the rise in the cost of living caused by food prices, as across the world prices were up 53 percent in April compared to last year.

Story link: UN reduces world growth for this year