Predicts increase in uncertainty after Brexit
July 20, 2016: Keeping a close eye on Brexit and its anticipated impact, the International Monetary Fund (IMF) has cut its global growth forecasts for the next two years. The move included a nearly full percentage point reduction in the UK’s 2017 growth forecast.
Cutting its World Economic Outlook forecast for the fifth time in 15 months, the IMF said that it now expects global GDP to grow at 3.1 percent in 2016 and at 3.4 percent in 2017 — down 0.1 percentage point for each year from estimates issued in April.
On the day before Britain’s June 23 EU referendum, the IMF was ‘prepared to upgrade our 2016-17 global growth projections slightly’, IMF Chief Economist Maury Obstfeld said in a statement. “But Brexit has thrown a spanner in the works.”
The IMF said that the impact will be hardest in Britain, where the institution cut its 2016 growth forecast to 1.7 percent, down 0.2 percentage points from its April forecast. It cut the 2017 UK forecast more sharply, by 0.9 percentage points, to 1.3 percent.
The IMF lifted its euro zone forecast slightly for 2016, but cut its 2017 outlook by 0.2 percentage point to 1.4 percent for 2017.
As far as China’s outlook is concerned, IMF has kept it largely unchanged. Recessions in Brazil and Russia will be less severe than previously forecast this year due partly to some recovery in oil and commodities prices, the IMF said, adding that both countries will return to positive growth in 2017.
The Fund urged policymakers not to accept the tepid growth rates as a ‘new normal’ and said that they should support demand in the near term and structural reforms to aid medium-term growth.