United Kingdom economic growth for 2019 downgraded by International Monetary Fund amid Brexit uncertainty

Christine Lagarde managing director of the International Monetary Fund addresses a news conference on the eve of the World Economic Forum in Davos on Monday
IMF predicts India will surpass China's growth rate in 2018
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23 January, 2018

That would be the strongest year for global growth since 2011 and represents an upward revision of 0.2 percent since the IMF's forecast in October.

Speaking further on the theme of the Davos 2018 summit "Creating a Shared Future in a Fractured World" the IMF MD gave three areas the shared future can be achieved.

But markets have rallied since Deputy President Cyril Ramaphosa's election as the ruling African National Congress (ANC) leader in December, as investors have warmed to his promises to root out corruption and kick-start economic growth. Next year, growth is seen edging up to 2.5% versus 1.9% predicted in October.

The speed of world economy accelerates, world GDP will grow this year and one that comes 3.9% (two-tenths more than expected), driven by Europe, Asia, and "The impact of recent fiscal changes in United States".

The IMF cited geopolitical tensions, such as the rising nuclear threat posed by North Korea and faster-than-expected monetary tightening in the United States and Europe, as risk factors that could affect an otherwise sound outlook for the world economy.

The WEO upgraded the US GDP forecast by a surprising four-tenths of a point this year to 2.7 percent, compared to the expected 2.3 percent in 2017. High-frequency hard data and sentiment indicators point to a continuation of strong momentum in the fourth quarter.

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The IMF said the short-term impact in the U.S. will mostly be driven by the investment response to the corporate income tax cuts. On the upside, the cyclical rebound could prove stronger in the near term as the pickup in activity and easier financial conditions reinforce each other, the report said.

Risks to the global growth forecast appear broadly balanced in the near term, but remain skewed to the downside over the medium term.

As major stock markets worldwide have been on the upswing, with repeated records set on Wall Street, the report warned that "rich asset valuations... raise the possibility of a financial market correction, which could dampen growth and confidence".

At that time the IMF's director general said that the UK's economic performance since the Brexit vote in June 2016 had vindicated the Fund's pre-referendum warnings.

The survey will come as a booster for Prime Minister Narendra Modi who will court global investors on Monday and Tuesday in a bid to get more investment into the country, especially in the manufacturing sector, which has remained sluggish and is crucial to job creation. Markets expect prices to gradually decline over the next 4-5 years.

"Weak inflation suggests that slack remains in many advanced economies and monetary policy should continue to remain accommodative". Forecasts for emerging and developing economies were unchanged.


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