Brexit throws 'spanner in the works' of global economy - IMF
The International Monetary Fund (IMF) has cut its global growth outlook for the next two years due to the uncertainty caused by Britain's vote to leave the European Union.
The Washington-based institution now expects the world economy to grow by 3.1 percent in 2016 and by 3.4 percent in 2017 - 0.1 percent down compared to the figures posted in April.
The UK’s 2017 growth forecast has been slashed by 0.9 percentage points, to 1.3 percent with the current year outlook changed by 0.2 percentage points to 1.7 percent.
The IMF projects insignificant impact on the US economy. The fund raised its forecast for the euro area 0.1 points this year, to 1.6 percent, and lowered it by 0.2 points in 2017, to 1.4 percent.
The UK's Brexit vote may cause a “substantial increase in economic, political and institutional uncertainty” having a huge impact on investment, market and consumer confidence, according to the IMF.
IMF downgrades UK GDP forecast to 1.7% (from 1.9%) for 2016 and 1.3% (from +2.2%) for 2017. Full table here: pic.twitter.com/1VQdJc0Z6U— Markit Economics (@MarkitEconomics) July 19, 2016
The global financial agency warns that the latest projections are based on its best-case scenario concerning Brexit with more negative outcomes being distinctly possible.
Under the more negative IMF scenarios global growth would drop below three percent as businesses may start moving away from Britain to the EU with Brexit sparking financial stress and dislocation.
..note IMF global grth forecasts for last 5 yrs have started ~4% & ended ~3%.Nothing new. We forecast 3% for 16 & 17 pic.twitter.com/nNx6XSK0Nu— Shane Oliver (@ShaneOliverAMP) July 19, 2016
The IMF says other major risks may include European banking crises, especially in Italy and Portugal with banks having “unresolved legacy issues.”