IMF revises down global growth after Brexit – The Tribune.fr

The IMF revised down its growth forecast for the world and the euro zone due to “considerable uncertainty” after the British vote June 23 for the Brexit . “The results of the British referendum, which caught the global financial markets, representing the materialization of a considerable downside risk for the global economy ” explained the Institution of Washington. At issue: the uncertainty of the outcome conditions Brexit. “The first casualty of this vote should be the UK itself. This uncertainty would undermine confidence and investment “, the IMF said. However, adds the institution, following the Brexit “to be defined” , forecasting task is complicated.

Emerging resistance

in the end, the IMF revised downwards by 0.1 points its global growth forecast for 2016 and 2017 respectively to 3.1% and 3.4%. In 2015, global growth was already 3.1%. The developed countries should, however, be more affected than emerging countries. In the latter, the IMF growth forecast steady at 4.1% in 2016 and 4.6% in 2017. Note that the upward revision is significant for Russia and Brazil (a half point more for both) in 2016, even though these countries are expected to remain in contraction of their wealth to -0.6% and -3.3% respectively. China’s growth has not been corrected, it is expected to slow to 6.4% and 6.3% in 2016 and 2017 against 6.6% in 2015.

Advanced countries revised downwards

the revision is strongest in so-called “advanced” countries where growth will be only 1.8%, down 0.1 points. The US is expected to grow only 2.2% this year against 2.3% expected earlier and 2.5% in 2017. A revision due to Brexit less than a disappointing first quarter. In Japan, the downward revision of 0.2 points to just 0.3% this year and 0.1% next year. The Empire of the Rising Sun is indirectly affected by the rising yen consecutive to the uncertainty related to Brexit. But the IMF warned that the third world economy could grow faster if, as “it is expected” , a stimulus package proposed in the amending budget 2016.

the euro area at low speed

paradoxically, growth in the euro area resists rather well in 2016, given the strong first quarter (quarterly growth of 0.6%). The IMF therefore revises its growth forecasts for the 19 to 1.6% in 2016 against 1.7% in 2015. Low level nonetheless. Note that France sees its growth forecast jump by 0.4 points to 1.5%, almost as much as Germany (1.6%, +0.1 points). However, Italy saw its forecast reduced to 0.9% this year from 0.1. The IMF is concerned about the state of the banking sector in the boot. For 2017, the impact of Brexit will be more sensitive with a decline of 0.2 points of growth forecasts to 1.4% only. The slowdown will be significant in Germany, where the expected growth was reduced by 0.4 points to 1.2%. France would then be at par with its neighbor (growth revised down 0.1 points). Italy will have to settle for 1% against 1.1% previously expected.

The UK slowed sharply

Obviously, the first victim of the uncertainty of Brexit will … UK. The Fund reviews the growth of the second European economy radically down 0.2 point lower in 2016 at 1.7% and 0.9 percentage points lower in 2017 at 1.3%. No annual contraction in GDP, therefore, but a sharp slowdown. Domestic growth, including investment, will be affected.

The persistent problem of the euro area

The IMF forecasts certainly does not paint a catastrophic picture of the situation, but it is clearly, growth will still be low, too low. This is an element that is a problem for central banks around the world that seem to have arrived at the end of their abilities. Recovery prospects in Japan and China, and to a lesser extent in the UK, could change that if they are ambitious and thoughtful. For the ECB, two days before the meeting of the Board of Governors, the IMF forecasts pose again the problem of low growth in the euro zone still dunce cap global growth, excluding Japan. Despite Brexit, UK growth will remain higher than in the euro area in 2016 and 2017. Germany, model and director of this area shows poor performance. The persistence of low inflation and the lack of true “ policy mix “, ie a complement between monetary and fiscal policy, contribute to these poor results. Unfortunately, no change on that front is in sight.