IMF's global growth forecast down to 3.4 % post Brexit

21 Jul '16

4 min read

Dwelling on the Brexit effect in other advanced and emerging markets, IMF said its impact in Japan will lead to a stronger yen that will limit its growth.

Brexit's fallout is likely to be felt in Japan, where a stronger yen will limit growth. The IMF cut its 2016 growth forecast by 0.2 % point, to 0.3 %. Next year, Japan's economy, the world's third-largest, is expected to expand 0.1 %, 0.2 % point more than predicted in April, due to postponement of the consumption tax increase.

In the U.S., weaker-than-expected growth in the first quarter prompted the IMF to reduce its 2016 forecast to a gain of 2.2%, 0.2 % points less than the April outlook. The IMF left its 2017 forecast for U.S. growth unchanged at 2.5 %.

China's growth forecast for 2016 is up 0.1 % point, to 6.6 %, and is unchanged for 2017 at 6.2%. 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 U.K.

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

The outlook for other emerging and developing economies remains diverse and broadly unchanged relative to April. 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. (SH)

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