The IMF makes the prediction in its Global Financial Stability Report.
The document suggests what began as a liquidity crisis is now evolving into a much more serious and long term economic issue.
It puts aggregate losses related to the residential mortgage market and related securities at about $565bn.
It says losses in the commercial real estate and consumer and corporate credit markets bring that figure up to $945bn.
The report says: “It is now clear that the current turmoil is more than simply a liquidity event, reflecting deep-seated balance sheet fragilities and weak capital bases, which means its effects are likely to be broader, deeper, and more protracted.
“A key challenge is to ensure that large systemically important financial institutions continue to move quickly to repair their balance sheets, raising equity and medium-term funding, even if it is more costly to do so now, in order to boost confidence and avoid further undermining the credit channel.”
It suggests that government policies will be the first line of defense for containing the issue.
The report says the short term auctions being held by central banks are helping to restore liquidity but that policymakers will need to address the problem from a number of angles by reflecting further on the role monetary policy tools, such as interest rate cuts, may have to play in minimising the effects of the downturn.