UK GDP growth is now expected to slow to 1.3pc in 2017, some 0.9 percentage points below what had been pencilled in in the IMF’s previous round of forecasts. With the exception of Nigeria, the UK’s 2017 growth forecast received the sharpest downgrade of any of the 16 economies assessed by the IMF, reports Obestjose.
Maury Obstfeld, the IMF’s chief economist, said that the UK’s decision to withdraw from the EU had added “downward pressure to the world economy at a time when growth has been slow”.
He said that “the direct effects specifically due to Brexit are greatest in Europe, especially the UK”.
Despite the downgrade, economic growth in Britain will still outstrip Germany and France, whose economies are expected to expand by 1.2pc next year. The UK will also beat Italy, where GDP is forecast to rise just 1pc.
The figures were part of a wider IMF report on the global economy. The fund’s economists said the result of the EU referendum would contribute to slower global growth both this year and next. Economists now anticipate world GDP growth of 3.1pc this year, and 3.4pc in 2017, having shaved 0.1 percentage points off both estimates.
Mr Obstfeld suggested that global growth had begun to turn a corner, with “some promising signs” in the first half of 2016. However, he concluded that “Brexit has thrown a spanner in the works”, threatening to undo much of this progress.
Mr Obstfeld said that the impact of Britain leaving the EU would not be limited to a couple of years, and that it would “play out gradually over time”.
The fund’s growth projections were based on there being no major trade barriers erected between the EU and the UK after Britain leaves the bloc. They also assume there will be no serious financial disruption, with, at most, limited political fallout. If the outcome is less optimistic, then the UK could fall into recession, the IMF said.
A spokesman for the Treasury said: “The decision to leave the EU marks a new phase for the British economy.
“Our absolute priority is to send a clear signal to businesses both here and across the world, that we are open for business and determined to keep Britain and attractive destination for investors from overseas.”