The International Monetary Fund increased its forecast for UK GDP growth this year to 1.8%, citing resilient consumer spending in Britain, accepting that it was overly pessimistic in previously calling for a post-Brexit vote financial crash.
However, the organisation still believes that the UK will suffer from the EU referendum result, cutting its projection for 2017 growth down to 1.1% – half the rate it predicted before the June EU referendum vote – as talks about separation from the bloc weigh down on investment in the country.
The IMF’s latest forecasts are based on “smooth post-Brexit negotiations and a limited increase in economic barriers”.
Graeme Leach, member of Economists for Brexit and chief executive of Macronomics, was quoted by the BBC as saying: “The IMF, together with countless other institutions, forecasted a state of Armageddon which hasn’t even come close to materialising in the UK.”
He added: “The UK economy seems to be strengthening, not weakening. Just today, construction PMI was positive, ahead of many gloomy forecasts.
“Consumer spending is strong, with retail sales up 6% and car sales also growing.”
Chancellor of the Exchequer Philip Hammond commented:
“There are still challenges ahead, as the IMF note in their estimate for growth in 2017. That is why I stand ready to take action to support our economy through any period of turbulence and will continue to pursue the long-term goals of fiscal consolidation and improved productivity.”
Global growth this year will be “subpar”
The IMF said in its latest World Economic Outlook that global growth is forecast to only expand by 3.1% this year.
“Taken as a whole, the world economy has moved sideways,” IMF chief economist Maurice Obstfeld said in a statement.
“Without determined policy action to support economic activity over the short and longer terms, sub-par growth at recent levels risks perpetuating itself.”