Brexit sees IMF cut UK and global growth forecasts

The International Monetary Fund (IMF) has cut its growth forecast for the UK in 2017 by 0.9% in its latest World Economic Outlook Update.

Looking beyond next year, the organisation has warned that the UK’s outlook could worsen if the exit process turns out to be more difficult than predicted.

The IMF forecast the UK’s gross domestic product (GDP) to grow by 1.3% in 2017, down from 2.2%. The GDP figure for 2016, meanwhile, stands at 1.7%, which is down by 0.2% since April.

As a result of the EU referendum’s surprise Brexit victory, global growth has been cut by 0.1% for this year and next.

The report said: “The Brexit vote implies a substantial increase in economic, political, and institutional uncertainty, which is projected to have negative macroeconomic consequences, especially in advanced European economies.”

According to Sky News, the forecast is the first from a large international body to look at the global effect of Britain’s decision to leave the European Union, which caused the pound to fall to a 31-year low soon after it was announced.

The IMF said its latest World Economic Outlook Update report assumed the level of economic uncertainty would gradually reduce, with both the UK and the EU avoiding an increase in economic barriers and market disruption while limiting post-Brexit political fallout.

However, the report also noted that, in a worst-case scenario, trade talks between the UK and EU could fail, causing a large part of Britain’s financial services sector to move into Europe, “markedly” reducing consumption and investment and plunging the UK into another recession.

Only by ensuring a “smooth and predictable transition to a new set of post-Brexit trading and financial relationships that as much as possible preserve gains from trade between the UK and the EU” could officials on both sides of the Channel avoid economic disaster, according to the report.

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