IMF forecasts economic slowdown in the euro zone because of ‘brexit’ – The Nation Costa Rica

 Updated July 11, 2016 at 12:00 am
 

Agency considers that investors will have less and less confidence

Washington, United States

the International Monetary Fund (IMF) lowered from 1.6% to 1.4% its forecast economic growth in 2017 for the euro zone as a result of “negative impact” of the vote in favor of the departure of the United Kingdom of the European Union (EU), known as brexit.

This new estimate revised down two tenths predicted in April and warned that if the current “risk aversion continues (…), the impact on growth could be greater. “

for 2018, growth is expected to be 1.6% below the 1.7% forecast three months ago by the world body.

in his full review report on the economy of the single currency, the Fund stressed that “the expected growth of Gross Domestic Product (GDP) in the euro zone is expected to decelerate from 1.6% this year to 1.4% in 2017, mainly due to negative impact on the outcome of the referendum in the UK “.

the forum led by Christine Lagarde, who had warned before the negative effects of a possible departure from the UK of the European bloc, justified this cut by “a likely major weakness of investor confidence due to higher uncertainty, increased financial volatility and lower demand for British imports”.

“this is a preliminary analysis, at this time is very difficult to say how long it will last this time,” said Mahmood Pradhan, Deputy Director of the European Department of the IMF.

“uncertainty will persist while not clarify what the status of the new relationship between the UK and the EU,” he added.

smooth Transition. In recent days, the agency has insisted on the need for “a smooth and predictable transition” in the words of Lagarde, but even the details of the process of British withdrawal from the EU are unknown.

Before the vote, the Fund had stressed that the choice of brexit cause a spike in inflation, slowdown in growth and a depreciation of the British pound.

from June 23, the date of the referendum, the British pound has fallen around 10% against the dollar and is at the lowest in more than three decades in the US currency

.

in the medium term, in addition, the Fund predicts a scenario of “mediocre” growth for the euro area as that deep scars of the crisis, as high levels of debt, high unemployment, especially among the younger population, and unresolved problems in the banking systems of several countries.

persist

therefore , Pradhan stressed that the euro zone has “a decisive moment”.

“the progress made during the most acute phase of the crisis and recovery should not lead to complacency about the underlying challenges. The authorities must seize the moment to reverse the rising tide of Euroscepticism and strengthen the monetary union acting together, “he added.

To Pradhan, the confluence of a” too much inflation low, weak investment, still high unemployment and an aging population will continue to damage productivity and increases the risk of stagnation “.

it is expected that inflation in the euro zone close this year at 0.2%, compared with 0.3% forecast in April; and will rise to 1.1% next year. In both cases, it is well below the annual target of 2% set by the European Central Bank (ECB).

In the next five years, growth is anticipated just 1.5% in the eurozone, with inflation at 1.7%.