IMF warns of ‘disruptive’ Brexit threat

london — Europe’s economy is now hitting its stride, the International Monetary Fund said on Monday, but a disruptive Brexit could result in “appreciably” lower growth for both Britain and the eurozone.

The IMF’s latest Regional Economic Outlook, which looks at more than 40 countries from Germany and the UK to Turkey and Russia, said the current recovery looks increasingly assured.

It is partly driven by central bank stimulus and low interest rates, but also by improving fundamentals, as evidenced by a pick-up in investment across a broad range of economies.

“This recovery looks increasingly durable,” the deputy director of the IMF’s European Department, Joerg Decressin, told Reuters at a presentation of the report published on Monday.

“Growth in the euro area has been positive for 18 quarters, lately around 2.5 per cent. Many countries in eastern Europe have seen growth around or above 3 per cent for some time already. So this recovery has not only become broader but also stronger.”

The IMF’s World Economic Outlook, published at September meetings in Washington, forecasts region-wide growth of 2.4 per cent this year and 2.1 per cent next year, but much has shifted in the background since then.

The main uncertainty on the horizon remains Brexit and what kind of trade relationship Britain can set up when it leaves the European Union with the 27 remaining countries.

Decressin said the IMF’s expectation remained that a deal with a transition period would be struck. Its economists have not run any “no deal” forecasts, he said, but a “disruptive” Brexit is likely to have a damaging impact.

“Under such circumstances, our concern is that economic growth will suffer, especially in the UK, but also the euro area,” he said. “We are then possibly looking at appreciably lower growth than we presently project.”

For now, though, he flagged how much more positive the mood was than just one or two years ago, when worries were still rife in the eurozone that Greece would be forced out. — Reuters