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IMF: Brexit casts a cloud over global GDP growth

Reporter: Martina Fuchs 丨 CCTV.com

07-20-2016 01:18 BJT

Just a few minutes ago, the International Monetary Fund released its World Economic Outlook July Update. The global lender sends a pessimistic message and cuts the global growth projections for this year as well as next, saying Brexit has worsened the global economic outlook and increased financial market risks. 

Junfeng, before the June 23 vote in the UK, the IMF's outlook was broadly in line with the April World Economic Outlook. But, Brexit has changed this equation, as it triggered a lot of financial uncertainty and fresh downside risks for the world economy.

As a result, the global outlook for 2016 to 17 has worsened, despite the better-than-expected performance that we sawin early 2016.

The IMF says Brexit-related revisions are mainly concentrated in advanced European economies, with a relatively muted impact elsewhere, including in the United States and China.

In numbers, this means the following: The baseline global growth forecast has been revised down modestly relative to the April outlook, by 0.1 percentage points for both years, to 3.1 percent in 2016 and 3.4 percent in 2017.

For the United States, the lender now forecasts a slightly lower real GDP growth of 2.2 percent for this year, but revised slightly upward the outlook for the euro area to 1.6 percent, and for China to 6.6 percent this year. 

With Brexit still very much unfolding, the IMF says the extent of uncertainty is complicating the already difficult task of macro economic forecasting.

But for China, the good news is the country’s low trade and financial exposure to the UK, as well as the authorities’ readiness to respond to achieve their growth target range.

However, should growth in the European Union be affected significantly, the IMF says the adverse effect on China could be material.

It also warned that continued reliance on credit as a growth driver is increasing macro and financial stability risks. Well, let's hope all these fears won't materialize.

This World Economic Outlook is the second update so far this year, and the IMF will release a more thorough assessment of the global outlook in October. 

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