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Brexit vote throws spanner into global growth forecast

21 July 2016

Its most recent prediction of 3.2 per cent growth across the world has now been reduced to 3.1 per cent, with the forecast for UK growth for this year being cut from 1.9 to 1.7 per cent and, for next year, from 2.2 per cent to a lowly 1.3 per cent.The IMF said its latest forecasts were based on a “benign” assumption of a gradual reduction in uncertainty with the prospect of a deal between the UK and EU avoiding a large increase in economic barriers, no major financial market disruption and limited political fallout.”The first half of 2016 revealed some promising signs, for example, stronger than expected growth in the euro area and Japan, as well as a partial recovery in commodity prices that helped several emerging and developing economies,” said Maury Obstfeld, IMF economic counsellor and director of its research department. As of June 22, we were therefore prepared to upgrade our 2016-17 global growth projections slightly. But the Brexit vote (in the June 23 referendum) has thrown a spanner in the works.”The IMF said stresses from the Brexit vote could cause stresses within the European banking system, particularly in Italy and Portugal. “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.”Source

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