Credit Crunch Hits Hardest Next Year
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. 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. “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. Financial institutions have cut inter-bank lending to limit exposure to U.S. subprime home loans that were sold around the world via packages of asset-backed securities. Central Banks have injected liquidity to compensate for the liquidity squeeze. A few more months will be needed to access the full impact on banks, companies and governments. Yikes!
