Strong Global Growth Decelerating. International Economic Outlook 2008

The world economy continues to expand at a vigorous rate for the fifth year in a row, with real output growth exceeding 5 percent. Downside risks to global economic activity have increased mainly because of the aggravation of the real estate crisis in the USA, where real estate prices have been falling since the spring of 2007 and residential investment now stands around one fourth below its all-time high at the end of 2005; the latest data point to a further exacerbation of the slump. In summer, these developments put additional strain on the market for mortgage-backed securities, got several banks into financing trouble, and caused a general liquidity shortage. As a consequence, risk premia on international financial markets increased.