The International Monetary Fund (IMF) on Tuesday revised down its forecast for global growth in 2016 and 2017, due to the uncertainty surrounding Britain's exit from the European Union (Brexit).
The IMF expects the global economy to grow 3.1 percent in 2016 and 3.4 percent in 2017, both 0.1 percentage point lower than its forecasts in April, according to its updated World Economic Outlook report released on Tuesday.
"The outcome of the U.K. vote, which surprised global financial markets, implies the materialization of an important downside risk for the world economy. As a result, the global outlook for 2016-2017 has worsened, despite the better-than-expected performance in early 2016," said the IMF.
The Fund said that the uncertainty surrounding Brexit is projected to take a toll on confidence and investment, including through its repercussions on financial conditions and market sentiment more generally.
But it added that Brexit-related revisions are concentrated in advanced European economies, with a relatively muted impact elsewhere, including in the United States and China. The outlook worsens for advanced economies while it remains broadly unchanged for emerging market and developing economies, it said.
The IMF expects advanced economies to grow 1.8 percent in 2016 and 2017, down 0.1 percentage point and 0.2 percentage points separately from its forecasts in April. The IMF kept its forecast for the growth of emerging economies unchanged.
Emerging market and developing economies are expected to grow 4.1 percent in 2016 and 4.6 percent in 2017. The Fund revised China's economic growth forecast this year up to 6.6 percent from its April's forecast of 6.5 percent, saying that the near-term outlook has improved due to recent policy support.
The IMF revised its U.S. economic growth forecast in 2016 down to 2.2 percent from its April's forecast of 2.4 percent, due to the weaker-than-expected growth in the first quarter.
Aside from downside possibilities associated with Brexit uncertainty itself, there are other continuing downside risks, including Europe's refugee crisis, long-term unemployment, nonperforming loans, debt overhangs, and geopolitical risks, IMF chief economist Maury Obstfeld said on Tuesday.
Obstfeld called on policymakers to take action to boost growth in order to avoid a descent into persistent stagnation and pursuing protectionism which could make growth worsen further.
The Leave camp won the Brexit referendum held on June 23 by obtaining nearly 52 percent of ballots, pulling Britain out of the 28-nation EU after its 43-year membership. Yet, after Britain's Brexit referendum, European Council President Donald Tusk said that renegotiating the relationship between Britain and EU could take up to seven years.
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