IMFsays US recession 'a significant likelihood'

The IMF says it's likely the US will enter a recession following the US terror attacks.

Its cut its forecasts for global economic growth this year.

Economists say a number of industries have been particularly hard hit by the events of September 11.

This is despite the fact that the direct damage caused by the attacks on New York and Washington was relatively small - smaller than that caused by the Kobe earthquake in Japan.

The real damage, says the IMF, can be seen in business and consumer confidence.

With the uncertain outlook for the US, IMF chief economist Kenneth Rogoff stressed that Europe and Japan will have to rely more on internally-generated growth.

He said: "There is no doubt that the attack is having a negative effect on activity now in many regions of the globe.

"Global growth is likely to be rather lower than the 3.5% presently projected."

Rogoff also cautioned against further increases in public spending by the world's major economies to counter the impact of the Sept 11 attacks.

"It is probably best to wait a little to see how events develop; frantic, ill-focussed actions to stimulate the economy risk being counterproductive," he said.

In general, Rogoff said the global economy has become more flexible and less vulnerable to shocks such as the terrorist attack on the US, and although global markets have dropped significantly, "experience suggests that financial markets can over-react to such shocks initially."