Zee Beam News

Oct. 23, 2007 - Kommersant - Lower housing prices in the United States and malfunction of financial markets may result in the global economic downturn, IMF Managing Director Rodrigo de Rato warned Monday when speaking before the Board of Directors. ”We still do not know the full effects of the decline in the housing market and the subprime problems of the US economy. Further disruption in financial markets and further falls in housing prices could lead to a global economic downturn,” de Rato said. The existing risks will pose even the greater threat if a new crisis is triggered, the official cautioned. ”Some emerging economies that have relied on external financing to fund large current account deficits could be tipped into crisis by a combination of reduced demand for their exports and tighter financial market conditions," the official said, specifying that prospects of low-income countries would worsen as well. Another risk, de Rato went on, is that the central banks may falter when opposing the inflation that is accelerating in the states because of the higher crude and food prices. “All of these risks make action on already agreed policies more urgent,” de Rato said, emphasizing that the leading nations should acknowledge that the mere changes in exchange rate wouldn’t suffice to correct global dis-balances.