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IMF warns Brexit could cause severe global damage

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A vote for the UK to exit the European Union could do “severe regional and global damage”, says the IMF, as it downgrades its global growth forecast for the second time this year.

A vote for Brexit at the June referendum would disrupt established trading relationships and add to political strains in Europe stemming from the Syrian refugee crisis, the IMF’s semi-annual World Economic Outlook report says.

The IMF has downgraded the 2016 UK growth forecast by 30 basis points from its January forecast, to 1.9 per cent, and  has reduced the 2017 forecast to 2.2 per cent. Lower energy prices and a buoyant property market will offset headwinds from the uncertainty resulting from the lead up to the Brexit referendum as well as fiscal consolidation.

In contrast to other advanced economies, where currencies such as the yen and US dollar tended to strengthen, the UK pound depreciated 7 per cent between August and February, driven by concerns about the referendum as well as expectations of normalisation of monetary policy.

The IMF has also downgraded global growth projections, to 3.4 per cent this year and 3.6 per cent in 2017 – 20 basis points lower than its prediction in October, but slightly up on 2015’s growth figure.

Brexit ranked seventh in a list of near-term risks to the world economy, behind instability in emerging economies, economic transition in China, strains in oil reliant countries, a reduction in confidence and growth, and geopolitical risks.

Brazil, currently embroiled in a major corruption scandal, saw the largest downgrade in its growth, forecast to contract 3.5 per cent compared to 2 per cent growth forecast in October.

However, the IMF says advanced economies had “partially reversed their swoon” from the first couple of weeks of the year, due to stablising oil prices, lower capital outflows from China and central bank policy.

The report says China’s transition towards more sustainable growth based on consumption and services would ultimately benefit China and the world, while warning there would be “bumps along the way”. 

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Odd isn’t it that practically all international financial (and many political) organisations think that the UK is better off staying in the EU. They don’t appear to have a particular agenda – other than the well being of the world economy. But those other experts (who would seem to be in a minority) such as Boris (Me First) Johnson, Michael Gove, Mervyn (I didn’t see it coming) King and others seem to think we are better out. I doubt if they are as impartial and whether they we be around to pick up the pieces if they are successful and it all falls to pieces.

    • Maybe because they’re looking short term and only considering those short term ‘uncertainties’.
      Not much consideration of the un-democratic nature of the organisation and other political aspects.

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