Eurozone growth positive but threat of Brexit fallout
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. –