IMF cuts global growth forecasts, warns of risks to outlook

The International Monetary Fund (IMF) announced last week that it cut its forecasts for global economic growth this year and next as the unexpected U.K. vote to leave the European Union creates a wave of uncertainty amid already-fragile business and consumer confidence.

According to the IMF’s World Economic Outlook Update: “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.”

“Brexit has thrown a spanner in the works,” said Maurice Obstfeld, IMF Chief Economist and Economic Counsellor. And with the event still unfolding, the report says that it is still very difficult to quantify potential repercussions.

The economies of the United Kingdom (U.K.) and Europe will be hit the hardest by fallout from the June 23 referendum, which prompted a change of government in Britain.

Global growth, already sluggish, will suffer as a result, putting the onus on policy makers to strengthen banking systems and deliver on plans to carry out much-needed structural reforms.

The global economy is projected to expand 3.1 percent this year and 3.4 percent in 2017, according to the IMF (see table). Those forecasts represent a 0.1 percentage point reduction for both years relative to the IMF’s April World Economic Outlook.

Source: IMF

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