UK’s exit from EU said to cause ‘substantial’ boost in economic, political and institutional uncertainty

The International Monetary Fund (IMF) has slightly revised upwards its 2016 forecast for China, while cutting its forecast for global economic growth this year and next year, partly as a result of the unexpected UK vote to leave the European Union.

The IMF cut its global forecast for 2016 and 2017 by 0.1 percentage point each to 3.1 percent and 3.4 percent respectively, compared with the forecast made in April.

It said the Brexit causes “substantial” increase in economic, political and institutional uncertainly. “If not for Brexit, global forecast would have been slightly higher,” said the IMF World Economic Outlook Update released on Tuesday.

It forecast the UK economy to grow 1.7 percent this year, 0.2 percentage point less than the forecast made in April. Next year, the nation’s growth will slow to 1.3 percent, down 0.9 point from the April estimate and the biggest reduction among advanced economies.

For the euro area, the fund raised its forecast by 0.1 point this year, to 1.6 percent, and lowered it by 0.2 point for 2017 to 1.4 percent.

China’s growth forecast for 2016 is up 0.1 percentage point to 6.6 percent, and remains unchanged for 2017 at 6.2 percent.

Brexit fallout is likely to be muted for China, the world’s second-largest economy, because of its limited trade and financial links with the UK.

“However, should growth in the European Union be affected significantly, the adverse effect on China could be material,” the IMF said.

The IMF said the near-term outlook in China has improved due to recent policy support. Benchmark lending rates were cut five times in 2015, fiscal policy turned expansionary in the second half of the year, infrastructure spending picked up and credit growth accelerated.

The fund also described the indicators of real activity as “somewhat stronger than expected” in China, reflecting policy…

Read the complete story here