By David J. Lynch, USA TODAY  WASHINGTON  The U.S. economy will end the year mired in recession before mounting only a weak recovery in 2009, according to the International Monetary Fund.  In its latest economic forecast, the IMF said the world's largest economy won't be hitting on all cylinders until 2010. "In the United States, economic growth has nearly stalled," said Simon Johnson, the fund's chief economist.  For the second time in 10 weeks, the IMF has sharply lowered its growth forecasts for both the U.S. and global economies. The fund now predicts that the U.S. economy, hobbled by fallout from the housing market collapse, will grow at a barely perceptible annual rate of 0.5% this year and 0.6% in 2009.  But Johnson said the slowdown will be more evident in a comparison of U.S. output in the fourth quarter this year with the same period one year earlier. On that basis, the economy will shrink by 0.7%. "All major components of domestic demand will be sickly in 2008," the report said.  The IMF forecast painted a sober portrait of a global economy struggling to shake off "the largest financial shock since the Great Depression." After five years of robust global growth, the fund predicts world growth will slow to an annual rate of 3.7% this year.  But Johnson warned that the global outlook is at risk from "financial strains" that could prove deeper than expected. The IMF says there is already a 1-in-4 chance of a worldwide recession, which the fund defines as growth below an annual rate of 3%. That last happened in 2002 as the U.S. was suffering through a sharp slowdown following the collapse of a speculative bubble in technology stocks.  In the USA, consumers will remain under pressure this year amid continued financial market turmoil and home price declines. By the end of 2008, house prices in the USA will have fallen 14% to 22%, the fund says.  As the U.S. clears away its housing and financial market wreckage, the sluggish economy will take a toll on jobseekers. The IMF expects the unemployment rate, currently 5.1%, will reach 6.3% in 2009.  The fund applauded recent actions by the Federal Reserve aimed at containing the crisis. But it said the Fed, which already has cut its benchmark interest rate by 3 percentage points since September, may need to continue cutting rates for some time. It said policymakers also may be forced to take more drastic steps, including using taxpayer money to support the U.S. housing market.  You share in the USA TODAY community, so please keep your comments smart and civil. Don't attack other readers personally, and keep your language decent. Use the "Report Abuse" button to make a difference.
The world economy will slow sharply this year, according to an International Monetary Fund forecast, with the United States sliding into a recession amid housing, credit and financial slumps.