IMF slashes UK forecasts as Brexit 'throws spanner' in global growth

The IMF said the Brexit vote had “thrown a spanner in the works”, almost halving its expectations for UK growth in 2017 to 1.3% from an earlier 2.2% prediction due to the impact of the vote.

UK growth this year is now pencilled in at 1.7%, down 0.2 percentage points from the Washington agency's previous outlook.

Global growth is now projected to increase 3.1% this year and 3.4% in 2017, as the IMF's economists made a 0.1 point cut for both years.

"The Brexit vote implies a substantial increase in economic, political, and institutional uncertainty, which is projected to have negative macroeconomic consequences, especially in advanced European economies," said IMF chief economist Maurice Obstfeld.

The IMF says the UK and Europe will be worst hit by the Brexit fallout, but the effects will be felt around the world.

Obstfeld said his team was poised to upgrade its global growth assessment before the Brexit vote, because of the improvements to growth in the eurozone and Japan, along with the rebound in commodity prices helping lift large emerging market economies such as Brazil and Russia.

“It is therefore important to underscore that the real effects of Brexit will play out gradually over time, adding elements of economic and political uncertainty that could be resolved only after many months. This overlay of extra uncertainty, in turn, may open the door to an amplified response of financial markets to negative shocks,” he said.

The US is expected to grow 2.2% in 2016, as the IMF cut its recent 2.4% forecast, though this is more optimistic than Federal Reserve's 2% forecast.

The IMF largest cut was reserved for Nigeria, with a 4.1 percentage-point reduction to 1.8% contraction for 2016, while in 2017 the economy is seen rallying 1.1%, which is down 2.4 points from the recent projection.