To vote for Brexit, the international monetary Fund planned to marginally improve the forecast of growth of global GDP on higher than expected indicators of real activity in the economy of China as well as slowing decline of the economies of Brazil and Russia. However, after the referendum, the IMF downgraded its estimate for global GDP growth — for the fifth time in 15 months.
As follows from the published Fund the July Bulletin “prospects for the global economy,” the deterrent impact on global GDP will have an uncertainty around the UK’s exit from the EU, and the exacerbation of other risks — economic, political and geopolitical.
The Fund lowered its baseline forecast for global growth to 2016 and 2016 by 0.1 p. p. compared to April to 3.1% and 3.4%, respectively. The Outlook revision, among other things, due to the risks of Brexit, in particular “the significant increase in economic, political and institutional uncertainties, which are assumed to have negative macroeconomic consequences, especially in European countries with developed economies. The IMF expects that this uncertainty will have a negative impact on confidence and investment, including through its impact on the financial situation and, more generally, on the mood of the markets”.
Prospects worsen for countries with a developed economy (by 0.1 percentage points in 2016, 0.2 percentage points in 2017), whereas for emerging market and developing countries, they remain largely unchanged, noted in the forecast. Among the advanced economies to the greatest extent, the reduced growth forecasts for the United Kingdom, to 1.7% in 2016 and to 1.3% in 2017. Forecast of the Fund is based on the assumption that the UK and EU to conclude new trade agreement to exclude the growth of economic barriers between the block and the Kingdom. However, if the negotiations ended in a stalemate, Britain will slide into recession, the forecasts of the Fund. This will contribute to the outcome of the country’s financial institutions that will take their business to the Euro area and more significant than expected reduction in consumption and investment, said the Fund. “The real effects of Brexit will appear in due time”, — quotes Bloomberg review of the chief economist of the IMF Maurice Obstfeld.
The consequences of Brexit will impact mainly on the developed economies of Europe, whereas the effect of a British exit from the block in other countries, including the US and China, will be limited, the IMF predicts. In 2016, Euro area economy will grow by 1.6% (forecast improved by 0.1 p. p.), USA — 2.2%, China 6.6%, noted in the Bulletin.
According to experts Fund, in addition to the risks of Brexit, more pronounced have become other risks: long-term problems in the European banking system, especially in banks of Italy and Portugal, “destabilizing correction” of the Chinese economy based on credit as the driving force of growth, risks to financial stability in emerging market economies.
Significant risks are non-economic in origin, according to the IMF. Political differences in developed economies can make it difficult to address long-term structural problems and problems of refugees. The obvious threat is a move to protectionist policies. Geopolitical tensions, armed conflicts and terrorism have a powerful negative impact on the prospects of the countries of the Middle East. Economies of the Middle East, North Africa, Afghanistan and Pakistan will grow by 3.4% in 2016, the IMF predicts.
In connection with the increase in oil prices, the Fund predicts a smaller decline in Russia’s GDP is -1.2% in 2016, versus April’s assessment is -1.8%. In 2017, the Fund expects Russia’s economic growth by 1%. The prospects for the acceleration of the Russian economy are limited due to long-term structural problems and the impact of sanctions on the performance and investment, the document says.