IMF and Moody predicts low European growth rate from 2016-2017. The main reason: BREXIT. This year, growth in the Eurpoean union (EU) is expected at 1.6% as compared to 1.7% if Brexit did not transpire. In 2017, EU is projected to only rise to 1.4% as compared to the previous rate of 1.7%. Inflation will be extremely low, with only 0.2%. Risk aversion in the market will further exacerbate this condition.
Britain is even worse. Moody’s forecasted its growth in 2017 to drop from 2.1% to 1.2%. If Britain mimicked Norway – continue to have access to the EU market but does not have voting right – then the UK economy will contract only 1.5% per year compared to when the UK was still part of the EU. But if the British is to negotiate under the WTO, the contraction could reach 4.5% per year.
Previously, IMF predicted global growth rate at 3.2% this year. But with Brexit, this seems unlikely to be achieved.
European leaders have to work hard to restore the confidence that has begun to crumble. Brexit not only means UK is out of the EU, but will probably be ensued by a referendum on other countries. Signs of Britain’s disappointment flared from the voters mapping. The seniors that had chosen to unite with Europe many years ago have now decided to get out. One of the recommendations of the IMF is to prepare 80 billion Euro per month in the form of money printing program to expel the stubbornly low inflation.
Nevertheless, Brexit advocates remain confident that UK will recover. They replied: IMF has been ‘consistently wrong’ in most of their predictions in the past.
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