Eu­ro­zone growth pos­i­tive but threat of Brexit fall­out

The Myanmar Times - - International Business -

THE In­ter­na­tional Mon­e­tary Fund raised its growth fore­cast for the eu­ro­zone but warned of un­cer­tainty due to the still un­known con­se­quences of Brexit and dam­age caused by low in­fla­tion.

The IMF edged up the growth fore­cast for the 19 na­tion cur­rency bloc to 1.7 per­cent in 2016, from an ear­lier 1.6pc, cit­ing low oil prices and eco­nomic stim­u­lus poli­cies at the Euro­pean Cen­tral Bank.

“Low oil prices, a mod­est fis­cal ex­pan­sion in 2016, and easy mon­e­tary pol­icy will sup­port growth, while weaker in­vestor con­fi­dence on ac­count of un­cer­tainty fol­low­ing the Brexit vote will weigh on ac­tiv­ity,” the IMF said.

It also edged up the fore­cast for growth next year to 1.5pc, from the ear­lier 1.4pc, a slow­down as the ef­fects of the UK’s vote to leave the EU will deepen over time.

The IMF warned that su­per low in­fla­tion will re­main a re­al­ity in Europe for at least the next five years in a warn­ing that the waves of un­prece­dented stim­u­lus by the ECB will fail to sub­stan­tially boost prices.

In ad­vanced economies, in­clud­ing the eu­ro­zone, “the risk of per­sis­tent low in­fla­tion (or de­fla­tion, in some cases) has risen”, the IMF said.

“Any boost in con­sumer prices “is pro­jected to re­main grad­ual with in­fla­tion re­main­ing be­low the Euro­pean Cen­tral Bank’s tar­get (of near 2pc) through 2021,” it said. –

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