WASHINGTON - THE International Monetary Fund (IMF) holds its spring meeting here on Saturday amid what officials describe as the worst financial crisis since the 1930s Depression and as the global economy weakens.

The 185-member IMF, set up to oversee the reconstruction of Europe after World War II, warned on Wednesday that the economic outlook was increasingly grim, with the United States in a recession from a housing meltdown whose effects are still spreading.

Global expansion would slow to 3.7 per cent in 2008, it said, cutting earlier forecasts and warning there was a 25 per cent chance growth would fall further to leave the world effectively in recession this year and next.

'The principal downside risk comes from the possibility that financial strains could deepen,' said Simon Johnson, the IMF chief economist.

That view was reinforced on Friday when the Group of Seven (G7) industrialised nations said the economic outlook was weakening and called on the banks to 'fully and promptly' reveal their risk exposure due to the current financial market turmoil within 100 days.

The world economy 'continues to face a difficult period ... (and) near-term economic prospects have weakened,' G7 finance ministers and central bank governors said after their own meeting here.

'The turmoil in global financial markets remains challenging and more protracted than we had anticipated,' they said.

'While economic conditions differ in our countries, downside risks to the outlook persist in view of the ongoing weakness in US residential housing markets, stressed global financial market conditions, the international impact of high oil and commodity prices, and consequent inflation pressures.'

The G7 finance chiefs also noted that since their last meeting in February, there have been 'sharp fluctuations' in major currencies and members 'continue to monitor exchange markets closely and cooperate as appropriate'.

Analysts said the G7 statement was a welcome recognition of the seriousness of the problems, especially with regard to the banks and getting some transparency back into the system.

Mark Weisbrot, an economist and co-director of the Center for Economic and Policy Research in Washington, said 'it is very positive that the G7 recognized this'. IMF managing director Dominique Strauss-Kahn said on Thursday the organisation would play a key role in confronting the global financial crisis. -- AFP

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