World growth could miss the International Monetary Fund's forecast of 4.1 per cent this year if US and European banks disclose more major losses on the subprime market, the head of the IMF said last night.
Dominique Strauss-Kahn, starting a three-nation African tour in Burkina Faso, warned that emerging economies would not escape the effects of the slowdown in rich countries, although they would continue to grow quickly in 2008.
Head of the International Monetary Fund's Dominique Strauss-Kahn
The IMF cut its 2008 global growth projection to 4.1 per cent last month from a previous forecast of 4.4 per cent, blaming the weak outlook in the United States and Europe.
"Are there some downside risks? Yes, of course. Mainly, we don't know exactly today if the whole disclosure on the subprime crisis has been done," Mr Strauss-Kahn said.
"It looks as if in the United States, a lot has been disclosed . . . many experts say that in Europe some disclosure has still to come, so it's very difficult to know."
Banks in the United States and Europe have already unveiled multibillion-dollar losses from defaults on loans to home owners with bad credit histories, as Western property markets have cooled and fears of a US recession have grown.
Mr Strauss-Kahn cited concerns over the health of "monoline insurers," specialised insurers that are facing billions of dollars in loses from risky US subprime bonds.