IMF's Lagarde Says Economy Faces `Significantly Higher Risks'
The International Monetary Fund renewed its warning about the risks to the U.K.’s economic outlook if Britain leaves the European Union without a deal.
The Washington-based lender held its 2019 growth forecast at 1.5 per cent, saying the fiscal stimulus announced in the Oct. 29 budget would likely help offset the dampening effect which Brexit fears are having on the world’s fifth-biggest economy. However, “substantial uncertainty” surrounds the estimate.
“This baseline projection assumes that a Brexit deal is reached in 2019 and that the U.K. transitions gradually to the new regime,” the IMF said in its World Economic Outlook Update Monday. “However, as of mid-January, the shape that Brexit will take remains highly uncertain.”
The forecasts were published on the eve of the World Economic Forum’s annual meeting in Davos, Switzerland. U.K. Prime Minister Theresa May isn’t attending this year as she deals with the unfolding political drama at home.
With less than 10 weeks before the U.K. is due to leave the EU, time is running out for May to get a withdrawal deal through Parliament after lawmakers emphatically rejected her blueprint last week. May will present her Plan B later Monday.
A chaotic departure would threaten the global outlook, according to the IMF. Global growth is set to slow to 3.5 per cent in 2019, though it could be weaker if a no-deal Brexit or a larger-than-anticipated slowdown in China materialize, it said.
The IMF sees the U.K. economy expanding 1.6 per cent in 2020, little changed from the 1.5 per cent it forecast in October.