Monday, October 13, 2025
22.8 C
Lagos

IMF Cuts Global Growth Forecast over BREXIT

The International Monetary Fund cut its forecasts for global economic growth this year and next as the unexpected U.K. vote to leave the European Union creates a wave of uncertainty amid already-fragile business and consumer confidence.
“The Brexit vote implies a substantial increase in economic, political, and institutional uncertainty, which is projected to have negative macroeconomic consequences, especially in advanced European economies,” according to the IMF’s World Economic Outlook Update released yesterday.
“Brexit has thrown a spanner in the works,” said Maurice Obstfeld, IMF Chief Economist and Economic Counsellor. And with the event still unfolding, the report says that it is still very difficult to quantify potential repercussions.
In particular, policymakers in the U.K. and the European Union (EU) will play a key role in tempering uncertainty that could further damage growth in Europe and elsewhere, the IMF said. It called on them to engineer a “smooth and predictable transition to a new set of post-Brexit trading and financial relationships that as much as possible preserves gains from trade between the U.K. and the EU.”
The global economy is projected to expand 3.1 percent this year and 3.4 percent in 2017, according to the IMF. Those forecasts represent a 0.1 percentage point reduction for both years relative to the IMF’s April World Economic Outlook.
The IMF said its forecasts were contingent on the “benign” assumptions that uncertainty following the U.K. referendum would gradually wane, the EU and U.K. would manage to avoid a large increase in economic barriers, and that financial market fallout would be limited.
Even so, the IMF warned that “more negative outcomes are a distinct possibility.” “The real effects of Brexit will play out gradually over time, adding elements of economic and political uncertainty,” said Obstfeld. “This overlay of extra uncertainty, in turn, may open the door to an amplified response of financial markets to negative shocks.”
Because the future effects of Brexit are exceptionally uncertain, the report outlined two scenarios that would reduce world growth to less than 3 percent this year and next.
In the first, “downside” scenario, financial conditions are tighter and consumer confidence weaker than currently assumed, both in the U.K. and the rest of the world, until the first half of 2017, and a portion of U.K. financial services gradually migrates to the euro area. The result would be a further slowdown of global growth this year and next.
The second, “severe” scenario, envisages intensified financial stress, particularly in Europe, a sharper tightening of financial conditions and a bigger blow to confidence. Trade arrangements between the U.K. and the EU would revert to World Trade Organisation norms.
In this scenario, “the global economy would experience a more significant slowdown” through 2017 that would be more pronounced in advanced economies.
The outlook for other emerging and developing economies remains diverse and broadly unchanged relative to April.
That said, gains in the emerging group are matched by losses in low-income economies. Indeed, low-income countries saw a large downward revision in 2016, in large part driven by the economic contraction in Nigeria, and also worsened outlook in South Africa, Angola, and Gabon.

spot_img
spot_img
spot_img

Hot this week

Zenith Bank, NEM, Seplat, AIICO, Dangote Cement, First HoldCo Recognised as Nigeria’s High-Performing Companies

L-R:    Michael Ani, Manager, Investor Relations, Dangote Cement; Oluseyi...

Rosatom: Nuclear Energy Holds key to Africa’s Sustainable Future

The role of nuclear energy in meeting Africa’s future...

RMRDC Targets 30% Value-Added Policy on Export of Local Raw Materials

The Raw Materials Research and Development Council (RMRDC) says...

NDIC, CIBN Strengthen Collaboration in Emerging Issues in the Financial Sector

L-R: President/Chairman of Council, Chartered Institute of Bankers of...

Fidelity Bank Commences Disbursement of FGN MSME Intervention Funds

Tier One Lender, Fidelity Bank Plc, has commenced the...

Topics

The Role of Insurance in Aviation Business

Being text of the speech delivered by Mr. Olusegun...

CBN Debunks Naira Devaluation Report as Fake News

The Central Bank of Nigeria (CBN) has debunked a...

IPEN Unveils Identity, to Deepen Insurance, Pension Penetration in Nigeria

  A new group of insurance and pension journalists, the...

NAFDAC: NIVEA Black & White Roll-On Manufactured in Nigeria is Safe

Nigeria’s food and drugs regulatory body, the National Agency...

Samsung: Consolidating Electronics Market in 2013 for Global Leadership

  Samsung Galaxy Camera       Samsung Galaxy S111 Mini Samsung Electronics, the world's...

World Bank Report: Banks Provided $28bn in Climate Finance in 2014

The leaders of the powerful G7 countries made headlines in June when they committed to a low-carbon growth path and formally recognized the need to reach zero net emissions globally before the end of the century. They know it will require shifting trillions of dollars from carbon-intensive investments to low-carbon, resilient growth, and they called on the six big multilateral development banks (MDBs) to use "to the fullest extent possible" their balance sheets and their capacity to mobilize partners to increase climate finance for developing countries.

Enelamah, Industry Minister, for German-African Business Forum

Africa is a priority for German government in 2017...

Stanbic IBTC Bank Wins Best Foreign Exchange Provider Award

Stanbic IBTC Bank PLC, a subsidiary of Stanbic IBTC...
spot_img

Related Articles

Popular Categories

spot_imgspot_img