Citi Predicts Moderate 2008 Growth as it Prepares Staff Cuts

Banking giant Citi today reported that the world economy has seen strains in recent weeks but indications for next year show moderate growth, not a collapse.

The pressures on growth include high oil prices, a weak U.S. dollar, and the cracks in the foundation of the U.S. housing market, Citi reports in its annual prospectus for financial markets.

“The level of uncertainty around our base case is high,” said Lewis Alexander, Citi chief economist and head of economic and market analysis. “Our base case forecast … (finds) the recent financial turmoil will not overwhelm the global economy.”

Citi reports that the U.S. economy has strong underpinnings including productivity growth, the sectors that haven’t been impacted by the housing’s problems, solid household finances, and companies outside the financial sector have reported growing profits.

Citi predicts that the Federal Reserve will reduce interest rates “another 100 basis points” and this will “help to limit downside risks.”

Emerging economies are growing quickly and are better able to withstand shocks from external economies, Citi reports. The bank is predicting a slowdown in Europe countered by strong growth in Asia.

The good news for the world economy may not be enough to help Citi itself. A spokesperson appeared to confirm a report today by CNBC that Citi planned layoffs. The international bank earlier this year laid off 17,000 of its 320,000 employees. The spokesperson declined to provide the number of employees that might be laid off in the next round. Citi announced early this month it may write off between $8 billion and $11 billion in losses in the fourth quarter.

Citi’s annual prospectus this year is titled “Stress and Resilience: Market Implications for 2008 and Beyond.”