IMF changes mind for fifth time on growth after Brexit

BREXIT supporters yesterday accused the International Monetary Fund of resurrecting ‘Project Fear’ after it cut its economic forecasts for Britain.

Damning the UK’s recent performance as ‘tepid’, the pro-Brussels watchdog said it now expects the economy to grow by 1.7 per cent this year.

That is a downgrade from the 2 per cent it predicted in April and would be the worst year for the economy since 2012.

The IMF said growth would slow to 1.5 per cent next year. The eurozone is expected to grow faster than the UK in both 2017 and 2018.

But this is the fifth time the fund has changed its forecasts since the referendum last year — and none of the figures back up its pre-vote prediction of a deep recession if Britain opted to quit the EU.

‘This is Project Fear all over again. The IMF has been consistently wrong,’ said John Longworth, former director general of the British Chambers of Commerce. Gerard Lyons, co-founder of Economists for Brexit, added: ‘The UK economy didn’t have the economic collapse, did not have the financial Armageddon they predicted. What we actually see is the UK economy having done pretty well over the last year. They are far too pessimistic. Brexit is good economic news.’

In a gloomy analysis before the referendum, IMF managing director Christine Lagarde said a vote for Brexit would be ‘pretty bad to very, very bad’ for Britain.

Yesterday the fund’s chief economist Maurice Obstfeld was more measured, saying Brexit was a ‘mild negative’. He said Mrs Lagarde’s statement was based on the expectation that markets would react negatively. ‘Fortunately that scenario did not come to pass,’ he added.

The IMF was not alone in its predictions of calamity. In a ‘dossier of doom’, the Treasury said the economy would suffer a punishing recession following a vote to leave the EU. Instead, Britain has has grown for three quarters and figures due out this week are expected to show another boost from April to June.

Unemployment has fallen to a 42-year-low of 4.5 per cent — less than half the 9.3 per cent rate in the crisis-torn eurozone.

Mr Obstfeld warned the outlook could still be bleak if Brexit talks run into trouble. ‘We stick to our forecast that Brexit will be a negative,’ he said. ‘Our forecasts right now are that it is a mild negative. But if the parties are not reasonable and collaborative things could be worse.’

The IMF raised its forecasts for the eurozone, where it expects growth of 1.9 per cent this year and 1.7 per cent in 2018. The figures break down as 1.8 per cent for Germany, 1.5 for France and 1.3 for Italy.

Theresa May’s spokesman described the IMF assessment as ‘one of a number of forecasts’, adding: ‘The UK economy is in a strong position. We have employment at a record high and the deficit down by three-quarters.’

But Lib Dem leader Sir Vince Cable said: ‘ The IMF has downgraded its growth forecast more than for any advanced economy. That is largely down to Theresa May’s determination to pursue an extreme Brexit that endangers our free trade with the world’s largest single market.’