WASHINGTON, April 12, 2008 (AFP) – The global economy faces “considerable challenges” in the shape of a slowing US economy, financial market turmoil and higher inflation, US Treasury Secretary Henry Paulson said Saturday. Paulson, addressing the spring meeting of the International Monetary and Financial Committee, said global growth had been favorable in past years but circumstances had now changed in the fallout from the US home loan crisis.
“2008 will be a more difficult year, with headwinds coming from adjustments in the US economy, financial market stress, higher commodity prices, and higher than desirable inflation,” Paulson said, according to the text of his address.
“Downside risks will vary … but no economy is entirely immune from global forces.”
Paulson said that after several years of “what, in retrospect, was unsustainable home price appreciation, the US economy is undergoing a significant housing correction.”
The fallout puts all the risks on the downside and the US authorities have responded with a series of measures, including increased spending, to cushion the blow, he said.
“It took time to build up recent excesses and it will take time to work through the consequences. We must e