The International Monetary Fund (IMF) has upgraded its growth forecast for the United Kingdom this year, but has downgraded 2018 due to the expected knock-on effect of Brexit.
“held up better than expected”
The IMF found that the British economy has “held up better than expected”, despite previously suggesting Brexit would be “pretty bad, to very, very bad” and flagging the possibility of a recession. However, the IMF says a positive outlook is short lived.
According to the IMF’s World Economic Outlook, Britain’s growth for this year is expected to climb from 1.1% to 1.5%, but projections for 2018 are down to 1.4%, from the 1.7% mentioned in October.
The IMF is predicting that Brexit will have long-term economic repercussions, that will travel far beyond the shores of Europe. Maurice Obstfeld, the IMF’s chief economist, said: “Britain’s terms of exit from the European Union remain unsettled and the upcoming national electoral calendar is crowded, with possibilities of adverse economic repercussions, in the short and longer terms.”
Britain’s Office for National Statistics states that the UK’s GDP grew by 0.6% in the third quarter of 2016, and the full year growth is expected to be around 2.1%. 2017 and 2018 are expected to yield less successes.
The UK’s Office for Budget Responsibility projects growth to slow to 0.3% in the first quarter of 2017 and 0.2% in the second quarter. Despite the fluctuating predictions, the UK’s growth in 2017 is expected to be higher than Germany (1.5%) and France (1.3%).
According to CNN money, Brexit has wide implications for the US economy, which is already facing a slew of headwinds globally. The chief of the US central bank, Janet Yellen, said that “Brexit would negatively affect financial conditions and the US economy”, damaging trade and the price of the dollar.
“Britain’s terms of exit from the European Union remain unsettled”
Despite this, the IMF highlights that the United States will grow in 2018 in anticipation of fiscal stimulus from the Trump administration. It expects growth to be 2.5% next year, up from 2.1% previously.
“At this early stage…the specifics of future fiscal legislation remain unclear, as do the degree of net increase in government spending and the resulting impacts on aggregate demand, potential output, the Federal deficit, and the dollar,” Maurice Obstfeld said.
The IMF’s 2017 and 2018 global growth forecasts for the United States are unchanged at 3.4% and 3.6% respectively, which yet seem untouched by Brexit hysteria.
It remains to be seen what effect Brexit will have on British, European, and US economies. But, one thing is certain, President Trump’s good relationship with British Prime Minister Theresa May and their wish to forge closer economic ties is a promising sign.