Global growth projections for both 2016 and 2017 have been downgraded by 0.1 of a percentage point following subdued US growth and the impact of the Brexit vote, the International Monetary Fund (IMF) said, noting the effect of the UK’s decision is yet to be fully seen.
“Although the market reaction to the Brexit shock was reassuringly orderly, the ultimate impact remains very unclear, as the fate of institutional and trade arrangements between the United Kingdom and the European Union is uncertain,” the IMF said.
The IMF cautioned that the Brexit decision was part of a broader anti-globalisation movement in developed economies, which could pose a risk to economic growth.
“In advanced economies, a subdued outlook subject to sizable uncertainty and downside risks may fuel further political discontent, with anti-integration policy platforms gaining more traction,” it said.
Equally, weaker commodity prices are putting pressure on emerging markets, though the IMF acknowledged strong growth in emerging Asia and India, as well as an improvement in China’s outlook following the announcement of growth supportive policy.
The IMF said policy action was critical to mitigating the risks associated with these developments.
“These worrisome prospects make the need for a broad-based policy response to raise growth and manage vulnerabilities more urgent than ever,” it said.
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