Posted July 20, 2016 Ashley Chadwick
Yesterday the IMF released its latest global growth forecasts, its first release since the EU referendum and it described Brexit as ‘a spanner in the works’.
Unsurprisingly, the largest cut to growth that they made was to the British economy. They now only expect 1.3% growth in 2017, compared to the previous 2.2%. It also cut 0.2% of its 2016 forecast. The impact is less drastic for global growth, which it has only reduced by 0.1% for both 2016 and 2017. However, they did note that prior to the decision on the 22nd of June, they were set to slightly raise growth forecasts. It must be noted that the IMF’s forecasts are based on the UK eventually having a trading relationship with the EU, which is similar to the one that Norway currently has. This would mean that the UK would remain inside the single market, but this is not guaranteed.
The IMF also took a look at the public sector finances. It estimated that borrowing will rise by 0.7% of the national income in 2017. This represents a cost to taxpayers of £270 million a week. Such a cost is nearly as much as the £350 million that Brexit campaigners falsely claimed we would save if we were to leave the EU.
The impact of Brexit sent shockwaves throughout Westminster and the new government is just settling in to its new role. Theresa May is heading out to Germany for a meeting between the two most powerful Women on the planet. She will be hoping to begin informal Brexit talks, however, Merkel has repeatedly said that those talks will not being until article 50 is enacted. Meanwhile Boris Johnson, the new foreign secretary is trying to commence trade negotiations with non EU countries, but he is spending most of his time apologising for previous remarks.
The Labour party is also in a state of disarray, as their left wing leader Corbyn faces a challenge from Owen Smith. Whilst the Labour MPs seem to favour Smith and have no confidence in Corbyn, Labour party members may well vote Corbyn back in, in two months time. Some people are suggesting that this could result in a split within the Labour party, perhaps akin to the split in 1981, when leftist leader Michael Foot caused discontent.
The IMF finished their analysis by indicating that most of the global economy would see limited further impact from Brexit, although it still remains a risk.