IMF says Brexit will hit global economic growth

The Dollar Business Bureau

“Brexit has thrown a spanner in the works,” said Maurice Obstfeld, chief economist, IMF.

The decision by Britain to leave the EU group will affect global economic growth this year and the next, International Monetary Fund said.

The IMF on Tuesday shared its earlier estimate for the global economic growth to 3.1% this year and 3.4% in 2017. The recent estimates are 0.1% lower than the institution’s April forecast.  

The IMF said Brexit has created uncertainty which could wear away consumer and business confidence, resulting in freeze in investments. The UK must renegotiate its existing trade arrangements with Europe.

United States and China, the world's two largest economies, are unlikely to experience much economic trouble from the turmoil in Europe, it said.

The IMF had earlier downgraded its growth forecast for US this year to 2.2%, following a slow growth of the American economy at the start of this year.

For the Chinese economy, the institution has projected a 6.6% growth rate, up from its April forecast of 6.5%. The improvement in growth forecast comes in the backdrop of five interest rate cuts undertaken by the Chinese government last year and a significant surge in spending on infrastructure.

The IMF said the economic growth of Sub-Saharan Africa will continue to be limited, weighted down by last year's decline in commodity prices. “The Nigerian economy is expected to shrink 1.8%, a dramatic turnaround from the IMF's April forecast for 2.3% growth. The South African economy is forecast to eke out 0.1% growth,” it said.