Business

Brexit will hurt the world's economy, IMF says

Britain's decision to leave the European Union will reduce global economic growth this year and next, the International Monetary Fund says.

Bank cuts global growth forecast by 0.1 percentage points this year and next

The IMF has cut its forecast for the global economy this year and next due to the impact of the recent Brexit vote. (Matt Dunham/AP)

Britain's recent vote to leave the European Union will hurt the global economy this year and next, the International Monetary Fund said in a report Tuesday.

The IMF is shaving its estimate for worldwide growth to 3.1 per cent this year and 3.4 per cent in 2017. Both estimates are 0.1 percentage points lower than the bank's previous forecast in April.

For Canada, the IMF is now calling for growth of 1.4 per cent this year and 2.1 per cent next year. The first figure is a cut of 0.1 percentage points from April's forecast. The latter is a bump up of 0.2 points.

Brexit wounds

IMF chief economist Maurice Obstfeld said pre-Brexit the bank was prepared to slightly mark up its global forecast, citing unexpectedly strong growth in Europe and Japan and a partial rebound in global commodity prices. "But Brexit has thrown a spanner in the works," Obstfeld said.

Britain must now renegotiate its trade relationship with Europe, creating uncertainty that could erode consumer and business confidence and freeze investment.

"The U.K. referendum caught financial markets by surprise," the IMF said, adding that virtually all parts of the world could ultimately be impacted. But the true toll is still hard to gauge. "With the event still unfolding, it is very difficult to quantify its potential repercussions."

With files from The Associated Press

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