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Published September 25, 2007

Credit crunch set to hit hardest next year: IMF chief

(MADRID) Most of the impact of the global credit crunch will be felt in 2008 and the United States will be hardest hit, International Monetary Fund managing director Rodrigo Rato said yesterday.

World economic growth should remain high next year but looks set to be below the levels of 2006 and 2007 and downside risks increase the longer financial markets remain in crisis, Mr Rato told a seminar in Madrid.

'Credit markets are correcting, but slowly, we aren't at a stage of normality,' he said, adding that most countries should be able to cope with the financial conditions.

'It has an effect on the real economy which will be felt more in 2008, with greater intensity in the United States, less in other areas,' he said.

Mr Rato added that an IMF forecast of 3.3 per cent economic growth for Spain in 2008 had to be cut.

Regions with strong currencies could lose some competitiveness, he said.

'Strong currencies have advantages from the point of view of economic stability. They put some pressure on competitiveness,' he said. -- Reuters