Brexit does damage to British growth
THE International Monetary Fund cut its 2017 growth forecast for Britain, blaming Brexit, and warning the damage could be greater if rocky negotiations lead to trade barriers.
The IMF said it now expects Britain’s gross domestic product (GDP) to expand by 1.1 percent in 2017, a downgrade of 0.2 points from the previous prediction given in July.
That marks a significant slowdown compared with its estimate for 2016, the IMF said in its latest World Economic Outlook report.
The British economy is now expected to grow by 1.8pc this year, up 0.1 points from prior guidance.
“In the United Kingdom slower growth is expected since the referendum as uncertainty in the aftermath of the Brexit vote weighs on company investment and hiring decisions and consumer purchases of durable goods and housing,” the IMF said.
It added its assumptions are based on “smooth post-Brexit negotiations and a limited increase in economic barriers”.
However that may not turn out the case, the IMF warned.
The British pound crashed to 31year dollar lows on October 4 in the wake of weekend comments by Prime Minister Theresa May indicating a willingness to leave the single market in order to secure control over immigration from the EU.
The single market gives Britain tariff-free access to the EU.
The IMF also signalled that the British government, which is due to unveil its budget update on November 23, may need to re-assess its deficit-slashing measures in a bid to bolster growth.
The IMF acknowledged that the Bank of England’s wide-ranging stimulus program had buoyed sentiment.
In August, the bank slashed interest rates by a quarter-point to a record-low 0.25pc and expanded its main quantitative easing bond-buying scheme by £60 billion to £435 billion.
The IMF said that the BoE’s stimulus plan “signals its commitment to limit post-Brexit downside risks and maintain confidence”. –