IMF upgrades outlook for UK despite Brexit

The International Monetary Fund (IMF) became the latest forecaster to upgrade its outlook for the United Kingdom this year after the economy proved more resilient than expected following the vote to leave the European Union.

In its World Economic Outlook published on Tuesday, the Washington-based lender predicted growth of 1.8 per cent instead of the 1.7 per cent projected in July.

It cut its 2017 forecast to 1.1 per cent from 1.3 per cent and noted its estimates depended on smooth negotiations with the EU.

"Slower growth is expected since the referendum as uncertainty in the aftermath of the Brexit vote weighs on firms' investment and hiring decisions and consumers' purchases of durable goods and housing," the IMF said.

Pro-Brexit campaigners accused the IMF of scaremongering ahead of the June 23rd referendum.

Economic risks

IMF managing director Christine Lagarde had said "the economic risks of leaving are firmly to the downside" and warned the UK could slide into recession. Reports since then have suggested the economy is holding firm, with IHS Markit reporting on Monday that British factories had their best month in more than two years in September.

The Bank of England, the Organisation for Economic Co-operation and Development, Morgan Stanley and Goldman Sachs Group Inc are among those to have peeled back their pre-vote predictions of an economic shock.

The IMF nevertheless said it had cut its medium-term growth forecast to 1.9 per cent from 2.1 per cent in April on the assumption that “the economy’s ability to prosper will be impinged by weaker trade, migration and capital flows”.

Brexit is very much an unfolding event – the long-term shape of relations between the United Kingdom and the European Union, and the extent to which their mutual trade and financial flows will be curtailed, will likely become clear only after several years,” the IMF said.