THE INTERNATIONAL Monetary Fund (IMF) has trimmed its forecasts for 2008 and 2009 world economic growth, largely due to a marked worsening in the outlook for the eurozone, a G20 finance official said yesterday.

With a sharp US economic slowdown starting to spill into other regions, the official said the IMF had downgraded its world growth forecast for this year to 3.9 per cent, down from 4.1 per cent in its World Economic Outlook published only last month.

It projects 2009 growth of 3.7 per cent, down from 3.9 per cent, in a note prepared for a meeting of deputy finance ministers of the Group of 20 (G20) emerging and industrialised economies to be held in Rio de Janeiro on Saturday.

“Commodity prices will remain high and volatile... market turbulence will go on through 2009,” said the official, adding that the IMF saw the world economy slowing further in the second half of the year.

The IMF left unchanged its forecast for 2008 US growth at 1.3 per cent and shaved its outlook for 2009 growth to 0.7 per cent from 0.8 per cent.

However it was more downbeat in its new forecasts about the prospects for the euro-zone economy.

It cut its forecast for eurozone growth this year to 1.4 per cent from the 1.7 per cent it had predicted in July, and estimated 2009 growth at 0.9 per cent, down from 1.2 per cent, said the official who spoke on condition of anonymity.

The news helped eurozone government bonds extend gains as traders viewed the new IMF forecasts as more evidence that the European Central Bank (ECB) faces mounting risks to growth which will prevent it from raising interest rates.

The ECB has acknowledged that risks to economic growth are increasing but, with inflation near record highs, it is widely expected to leave interest rates unchanged at 4.25 per cent through the rest of this year. – (Reuters)