In its April World Economic Outlook, the International Monetary Fund (IMF) again downgraded its expectations for global economic growth in 2008 and 2009.

For 2008, the IMF now expects world output to increase by 3.7%, compared to its previous projection of 4.2%. In 2009, the IMF now expects that global output will increase by 3.8%, 0.6% less than its previous projection of 4.4%.

The IMF reduced its short-term growth forecast primarily to reflect the protracted financial crisis that was triggered by the collapse of the U.S. subprime mortgage markets and which subsequently has caused havoc in financial markets in most major developed countries.

Despite the negative impact of this financial tsunami on the economic health of the major developed countries, the emerging and developing economies have continued to exhibit comparatively strong growth.

Looking forward, the combination of strong productivity growth, improving terms of trade and strengthening policy frameworks should help these emerging economies to continue to outpace their developed trading partners over the near term and help to prevent a major slowdown in world growth.

With tightening credit conditions causing a mild recession in the United States and a slowdown in Europe, growth in these less-developed countries is likely to lose momentum in the second half of 2008 and into 2009.

This prospect for divergence — but not "decoupling" — of growth between developed and less-developed countries is similar to Reed Construction Data's expectations for growth in Canada relative to the United States.

Slower U.S. growth should cause a pull-back of growth in Canada in the second half of 2008 and into 2009. However, the extent of the slowing should be less severe than in the U.S. due to four factors: (1) recent federal and provincial tax cuts; (2) the lowering of interest rates by the Bank of Canada; (3) sustained oil and gas exports; and (4) recent growth in full-time employment.