IMF Cuts UK Growth Forecast
IMF Cuts UK Growth Forecast
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LONDON - The International Monetary Fund (IMF) has slashed its forecast for UK growth next year after warning that the decision to leave the EU has damaged the British economy’s short-term prospects and “thrown a spanner in the works” of the global recovery.
The IMF, which voiced strong misgivings about a vote for Brexit in the runup to the EU referendum, said it expected the UK economy to grow by 1.3 percent in 2017, 0.9 points lower than a previous estimate made in its April world economic outlook (WEO).
The fund said it had cut its forecasts for the global economy due to the likely knock-on effect of the vote on other countries, particularly in Europe. IMF expected to lower forecasts for UK and world growth following Britain’s decision to leave the European Union.
“The first half of 2016 revealed some promising signs – for example, stronger than expected growth in the euro area and Japan, as well as a partial recovery in commodity prices that helped several emerging and developing economies," Maury Obstfeld, the IMF’s economic counsellor said.
“As of 22 June [the day before the referendum], we were therefore prepared to upgrade our 2016-17 global growth projections slightly. But Brexit has thrown a spanner in the works," she added.
The IMF predicted global growth of 3.1 percent in 2016 and 3.4 percent in 2017, both of which are 0.1 points lower than forecast in April. Britain is still expected to be the second-fastest growing economy in the G7 this year, behind the US, despite having its growth forecast for 2016 trimmed by 0.2 percentage points to 1.7 percent.
Next year, the IMF believes that the UK will experience similar growth rates to Germany – the eurozone economy most affected by the Brexit-induced slowdown – and France.
It said: “The vote in the United Kingdom in favour of leaving the European Union adds significant uncertainty to an already fragile global recovery.
“The vote has caused significant political change in the United Kingdom, generated uncertainty about the nature of its future economic relations with the European Union and could heighten political risks in the European Union itself.
“This erosion of confidence was reflected in a large initial sell-off in global financial markets, which has since partly reversed. But continuing uncertainty is likely to weigh on consumption and especially investment.”
Maury said.
The IMF, which voiced strong misgivings about a vote for Brexit in the runup to the EU referendum, said it expected the UK economy to grow by 1.3 percent in 2017, 0.9 points lower than a previous estimate made in its April world economic outlook (WEO).
The fund said it had cut its forecasts for the global economy due to the likely knock-on effect of the vote on other countries, particularly in Europe. IMF expected to lower forecasts for UK and world growth following Britain’s decision to leave the European Union.
“The first half of 2016 revealed some promising signs – for example, stronger than expected growth in the euro area and Japan, as well as a partial recovery in commodity prices that helped several emerging and developing economies," Maury Obstfeld, the IMF’s economic counsellor said.
“As of 22 June [the day before the referendum], we were therefore prepared to upgrade our 2016-17 global growth projections slightly. But Brexit has thrown a spanner in the works," she added.
The IMF predicted global growth of 3.1 percent in 2016 and 3.4 percent in 2017, both of which are 0.1 points lower than forecast in April. Britain is still expected to be the second-fastest growing economy in the G7 this year, behind the US, despite having its growth forecast for 2016 trimmed by 0.2 percentage points to 1.7 percent.
Next year, the IMF believes that the UK will experience similar growth rates to Germany – the eurozone economy most affected by the Brexit-induced slowdown – and France.
It said: “The vote in the United Kingdom in favour of leaving the European Union adds significant uncertainty to an already fragile global recovery.
“The vote has caused significant political change in the United Kingdom, generated uncertainty about the nature of its future economic relations with the European Union and could heighten political risks in the European Union itself.
“This erosion of confidence was reflected in a large initial sell-off in global financial markets, which has since partly reversed. But continuing uncertainty is likely to weigh on consumption and especially investment.”
Maury said.
(rnz)
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