IMF cuts Eurozone growth forecast in aftermath of Brexit

The International Monetary has revealed it expects the Eurozone to grow at a much slower pace than previously thought, following the British decision to leave the European Union in a historic referendum last month.

In the annual report on the bloc's economy, the fund painted a dire picture of the financial outlook, as it forecasts 1.6% growth in GDP this year, having previously thought that the figure would be 1.7%.

Next year, that growth will slow to 1.4%, before returning to 1.6% the year after.

Inflation this year is also expected to remain at a superlow 0.2%, below the 0.3% forecast ahead of the referendum, and will rise to 1.1%, rather than 1.2%, in 2017 due to higher energy prices, the IMF said.

These forecasts are based on a model which placed the UK as still having a close relationship with the EU and following most of its laws surrounding trade, similar to Norway.

The impact would be even worse if the U.K. cuts its ties to the EU altogether and limits itself to global import and export rules set out by the World Trade Organization, he said.

“We would see very major disruptions in trade if we move to the WTO option,” said Mahmood Pradhan, deputy director for the IMF’s European department.

Britain decided to leave the European Union in June, leading to a steep drop in the value of the pound and vast swathes of uncertainty in markets regarding business in the UK.

The political ramifications have been equally as severe, with the landscape at Westminster turning on its head following the resignations of prime minister David Cameron, Ukip leader Nigel Farage, and the intense divide created in the Labour party in which Jeremy Corbyn's leadership hangs by a thread.