Isabel Ramos Jeldres
The International Monetary Fund downgraded yesterday for the fourth time its estimate for global growth this year by the impact of the vote in the UK to leave the EU European, and warned that the damage could worsen if confidence begins to waver between investors and companies. So much so that in the worst possible scenario global growth could slow to its lowest level since the financial crisis.
The IMF expects global GDP to grow 3.1% this year, one tenth less than I expected in April, and the same number of expansion recorded in 2015, revealed the update of its World Economic Outlook published yesterday. For 2017, growth was cut to 3.4% from 3.5%.
The new forecast is based on the premise that the British authorities and EU reach new trade agreements to avoid having a “large increase of economic barriers.” However, if negotiations fail, the UK could fall into recession, as more financial institutions are relocated in the euro zone and consumption and investment shrink more than expected. In a “severe” scenario, global growth could drop to 2.8% this year and next.
“In the least likely scenario is expected severe intensification of financial stress, especially in economies advanced in Europe, which would result in a tightening of global financial conditions and more pronounced effects on confidence, “described the Fund.
If growth actually slows to 2.8%, will be the lowest figure since 2009, during the financial crisis, when the world shrank 0.1%. “The real effects of Brexit gradually develop over time, adding elements of economic and political uncertainty that could be resolved only after many months,” said the IMF chief, Maurice Obstfeld, an economist at a press conference.
Optimism pre Brexit
the Fund recognized that planned to modestly raise its global outlook before the referendum on June 23 in the UK, because the Chinese economy has been stronger than expected and recessions in Brazil and Russia have been less severe than anticipated.
However, the IMF still expects the UK to grow this year, although 1.7%, not 1.9% as anticipated in April. By 2017, projected an expansion of 1.3%, which is almost one percentage point below April.
According to the institution, the impact of Brexit will focus on advanced European economies, with an effect neutral in other countries, including the US and China. The market reaction was initially “severe, but generally orderly” the IMF said.
Improve Brazil
The Fund confirmed an improvement in the outlook for Brazil, the largest economy Latin America. “The confidence of consumers and businesses seems to have started to recover in Brazil, and the contraction of GDP in the first quarter was more moderate than expected.”
Therefore, the recession of 2016 would “slightly less severe”, with a contraction of 3.3% instead of falling 3.8% anticipated in April. In 2017 the country would return to the black, with growth of 0.5%.
For the region as a whole, the IMF projects a 0.4% contraction, rather than a decrease of 0 , 5%, while for 2017 corrected the forecast upward by a tenth, to an expansion of 1.6%.
the IMF revised its estimate for the US slightly, with growth of 2.2% this year, instead of 2.4%, because the performance was lower than expected in the first quarter. For the second quarter and the rest of the year, a rebound is expected, “according to the weakening of the headwinds generated by the strengthening of the US dollar and declining investment in the energy sector”.
The euro zone, meanwhile, would expand 1.6% this year, one tenth more than expected. In 2017 you would at 1.4%, 0.2 percentage point lower than anticipated.
China will expand 6.6% instead of 6.5% this year due to improvement the short-term prospects thanks to the support of economic policy. “Active reference rates was reduced five times in 2015, and fiscal policy turned expansionary in the second half of the year, infrastructure spending rebounded and credit growth accelerated,” he described.
the region with the largest correction was sub-Saharan Africa, instead of growing 3%, 1.6% will this year.
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