So did the International Monetary
Fund (IMF) and its boss Christine
Lagarde (pictured) collude in “project
fear?”
The world’s leading monetary
authority was “bluffing” over Brexit ’s
threat to the world economy, a top
economic consultancy has claimed.
“Having spent the past few months
warning that Brexit would cause
“severe regional and global damage”,
the International Monetary Fund today
all but admitted that it had been
bluffing, and acknowledged that
economic growth outside Europe
would be “little affected”, Capital
Economics’ global economist Michael
Pearce wrote on Tuesday.
On the face of it he has a point.
The IMF’s latest global economic
forecast update still contains plenty of
warnings about Brexit. But it pulled its
punches when it comes to the actual
numbers. The Fund marked down its
projections for world GDP growth by
just 0.1 percentage point this year
and next.
No UK recession predicted
Sure the biggest national downward
revision was to the UK. The Fund now
expects the economy to grow by 1.3%
in 2017. That’s almost a percentage
point lower than its previous forecast.
“But even this is not as bad as the
recession that many commentators
anticipate,” Pearce wrote.
The IMF trimmed next year’s eurozone
forecast by 0.2 percentage point.
Projections for the US and most of the
rest of the world were unchanged. So
much, then, for the IMF’s claim that
there would be “severe damage”.
Admittedly, the Fund warned of a
more disorderly outcome from Brexit.
However, IMF Chief Economist
Maurice Obstfeld said this would need
a trade impact “greater than [the IMF]
thinks likely”. Financial conditions
would have to deteriorate far more
than they have so far.
China, US prospects far outweigh
Brexit: IMF
Instead of Brexit, prospects for the
world economy are still more likely to
be shaped by developments in China
and the US. Recent data suggest that
growth is holding up fairly well in
both. However, Capital still thinks
there’s room for unpleasant surprises.
“We expect the American and Chinese
economies to expand at a slower rate
in the coming years than the IMF
anticipates,” Pearce wrote.
“So Mr Obstfeld would be well placed
to keep his red pen close to hand.”
Perhaps paradoxically, the problem
for Brexiteers is the IMF’s tendency to
optimism. Capital reckons its global
growth calls were higher than actual
outcomes by 0.7 percentage point
between 2010 and 2014.

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