The International Monetary Fund on Wednesday slashed its 2008 global economic forecast, warning that turbulence stemming from a crisis in the US housing sector could crimp growth worldwide. The world economy is expected to expand 4.8 percent next year after a 5.2 percent pace projected for 2007, the IMF said in its twice-yearly World Economic Outlook (WEO) report.

The downgrade comes in the wake of turmoil in global financial markets in August that prompted the IMF to reverse course after an unusual update in July in which it raised its 2008 global growth forecast to 5.2 percent.

The greatest threat to the world economy is the financial market unrest stemming from the high-risk US subprime mortgage sector, where loans were given home buyers with poor credit histories, the IMF said. This has affected banks and lenders worldwide and made credit conditions more difficult.

“Risks to the outlook lie firmly on the downside, centering around the concern that financial market strains could continue and trigger a more pronounced global slowdown,” the 185-nation institution in Washington said.

“Thus, the immediate task for policymakers is to restore more normal financial market conditions and safeguard the continued expansion of activity.”

Despite the heightened risks, the IMF said that overall the world economy is poised for “solid” 4.8 percent growth, underpinned by generally sound fundamentals and strong momentum in the emerging market economies, such as China.