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IMF downgrades UK growth forecast on Brexit uncertainty

Thursday, 21 December 2017 5:21 PM [ Last Update: Friday, 22 December 2017 4:16 AM ]

IMF managing director Christine Lagarde speaks at a press conference in London to mark the publication of the preliminary conclusions of the IMF’s 2017 annual review of the UK economy. (AFP photo)

The International Monetary Fund (IMF) has warned that Britain’s referendum to leave the European Union is already damaging the UK economy, despite a strong recovery in global economic growth.

In a report released on Wednesday, the IMF trimmed its forecast for UK economic growth this year from 1.7 percent in October to 1.6 percent, and said it expected the economy to grow by 1.5 percent in 2018.

The IMF’s annual assessment of the UK economy highlights the difficulties it sees for Britain as Brexit negotiations with the EU move to the second stage of talks which include a potential transition deal and the broad outlines of Britain’s future trading relationship with the bloc.

“Firms are likely to continue deferring some investment decisions until there is greater clarity on the UK’s future trading relationship with the European Union,” the IMF said in a statement at the end of its two-week mission to the UK concluded.

“Despite a strong recovery in global growth and supportive macroeconomic policies, the impact of the decision to exit the European Union has weighed on private domestic demand,” it added.

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Speaking in London at the launch of the fund’s report, IMF managing director Christine Lagarde said the Brexit referendum is “already having an impact on the economy even though the UK is not planning to leave the EU until 2019.”

“We feared that if Brexit was decided upon, it would most likely entail a depreciation of sterling, an increase in inflation, a squeezing in wages and a slowdown and a reduction of investment,” she said.

Lagarde hit back at those who criticized the IMF when predictions of an immediate post-referendum recession failed to come to pass.

“Regrettably, the numbers that we are seeing the economy deliver today are actually proving the point we made a year and a half ago when people said you are too gloomy and you are one of those ‘experts’,” she said.

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