IMF Cuts 2017 Growth Forecasts For The U.K

The International Monetary Fund (IMF) has slashed its forecast for Britain’s economy citing slowing economic growth and the uncertainty arising from Brexit.

The IMF has forecasted a growth of 1.7 percent this year for the UK, which is a drop of 0.3 percentage points over the previous forecast in April.

The IMF had initially cut its forecast sharply for 2017 in the aftermath of the Brexit vote but later upped it to 2 percent after Britain continued to post strong economic growth in the second half of 2016.

In its latest update, the IMF said that it had been surprised by the weakness showing up in UK’s economic indicators for the first half of 2017. Growth recorded for the quarter at was just 0.2 percent. The IMF however retained its growth forecast of 1.5 percent for 2018.

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The latest IMF report is not a full-fledged forecasting round but only an update to its April projections. In a statement, Maurice Obstfeld, the IMF’s chief economist, said, 

Our projection for the United Kingdom this year is lowered, based on the economy’s tepid performance so far. The ultimate impact of Brexit on the United Kingdom remains unclear

The country has been seeing a spike in inflation largely due to costs going up from the fall in the value of the pound post the Brexit vote, putting a squeeze on household spending. This has been further compounded by falling wages.

A spokesperson for the Treasury said that the latest IMF forecast underlined the case to increase productivity within UK and negotiate a favorable deal with the EU. The spokesperson pointed out that with employment numbers at a record high and a declining deficit, the fundaments of the economy continued to be strong. With regards to the Eurozone, the IMF said that it is likely to post better growth than UK and expects the rise to be around 1.9 percent this year.

For the United States, the IMF has revised its forecast downwards due to its economy performing at a rate lower than expected and also because of increased pessimism regarding the capability of the Trump administration in enacting growth-supporting legislation.

Overall, the IMF has upgraded its growth forecast for the world economy from 3.2 percent last year to 3.5 percent this year and up to 3.6 percent in 2018. Growth remains strong in emerging markets. The IMF has increased its forecasted growth for China to 6.7 percent up by 0.1 percent while retaining its projection for India at 7 percent.

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