UK and world facing the biggest financial shock since the Great Depression, says IMF

ALEX BRUMMER
UK Dail Mail
Thursday, April 10, 2008

The world is facing the biggest financial shock since the Great Depression, warns the International Monetary Fund.

And the IMF warns that Britain could be the country hit hardest by the global credit crunch as it has bigger debts than anywhere else.

In its most startling report of modern times, it says the meltdown "has inflicted heavy damage on markets and the financial institutions at the core of the financial system".

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Analysis by the IMF reveals British banks will lose more than £20bn from the international mortgage meltdown, equivalent to three per cent of gross domestic product (GDP).

For the first time the IMF also predicts that the American economy is heading for recession and will shrink by 0.7 per cent this year, sending shock waves across the globe.

American banks, which it was thought would be worst affected, will lose £72 billion, or 1.4 per cent of US GDP.

Despite healthy growth in the Far East, it now believes there is a 25 per cent chance that the whole world could follow the Americans into recession.

"The financial markets crisis that erupted in August 2007 has developed into the largest financial shock since the Great Depression," the report says.

It estimates that the losses from American mortgages will reach $945billion (£500billion) - more than twice previous estimates.

Full article here.

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