The International Monetary Fund has said the world economy is set for a major downturn, with the US and Europe either in or on the brink of recession.
The IMF said a still-developing financial upheaval - the most violent since the 1930s - would take a heavy economic toll as markets wrestle with a crisis of confidence and global credit is choked off.
The IMF's assessment was written before a globally co-ordinated interest- rate cut of half a percentage point from a number of the world's main central banks.
In its report, the IMF warned that credit conditions remain very difficult, restraining global growth prospects.
'The world economy is now entering a major downturn in the face of the most dangerous shock in mature financial markets since the 1930s,' the IMF said in its World Economic Outlook.
In hindsight, the IMF said lax economic and regulatory policies probably allowed the global economy to 'exceed its speed limit'. At the same time, market flaws, together with policy shortcomings, allowed stresses to build. Now, the global economy is about to pay the price.
The IMF slashed its 2009 forecast for world growth to 3%, which would be the slowest pace in seven years, from a July projection of 3.9%, and warned that a recovery would be unusually slow. It said growth this year would come in at 3.9%, a touch below the 4.1% it projected in July.
It sees the US economy screeching to halt and warned a recession was increasingly likely with gross domestic product likely to contract in the final quarter of this year and the first quarter of 2009. For all of next year, it projects US growth of just 0.1%.
The fund said growth in the euro zone was likely to slow to 1.3% in 2008 and ease further to 0.2% in 2009.
