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IMF changes 2017 growth forecast for UK in upward revision


The UK is performing better than had been predicted in the wake of its vote to leave the European Union

The UK is performing better than had been predicted in the wake of its vote to leave the European Union

The UK is performing better than had been predicted in the wake of its vote to leave the European Union

The International Monetary Fund (IMF) has lifted UK growth forecasts for 2017 saying better-than-expected economic performance in the wake of the Brexit vote raised prospects for the year ahead.

However, a simultaneous downgrade to the IMF's forecast for 2018 is pointing to a slowdown in Britain's productivity.

In its latest World Economic Outlook, the IMF said it now expects the UK economy to grow by 1.5% this year, marking a 0.4% upward revision to forecasts made in October.

The UK is among a number of countries - including the Germany, Japan and Spain - to see growth forecasts raised "mostly on account of a stronger-than-expected performance during the latter part of 2016," the report stated.

"Preliminary third-quarter growth figures were somewhat stronger than previously forecast in some economies, such as Spain and the United Kingdom, where domestic demand held up better than expected in the aftermath of the Brexit vote."

The UK's Office for National Statistics (ONS) said Britain's economy expanded by 0.6% between July and September last year.

However, the director of the IMF's research department Maurice Obstfeld told reporters Britain's divorce from the EU was adding to uncertainty on the continent.

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"In Europe, Britain's terms of exit from the European Union remain unsettled and the upcoming national electoral calendar is crowded, with possibilities of adverse economic repercussions, in the short and longer terms," he said in opening remarks at a press conference used to launch the report on Monday.

The IMF has downgraded its UK forecasts for 2018 by 0.3%, with gross domestic product (GDP) growth for 2018 now expected to come in at 1.4%.

The Washington-headquartered organisation estimates Britain's economy expanded by 2% in 2016.

The report comes as Prime Minister Theresa May prepares to set out her approach to the forthcoming Brexit negotiations in a major speech at London's Lancaster House on Tuesday.

She has been accused by Labour leader Jeremy Corbyn of preparing to trigger a full-scale "trade war" with the European Union amid reports she is ready to pull Britain out of the single market.

Brexit jitters sent sterling tumbling to 1.198 against the US dollar late Sunday evening, marking its lowest level since the October "flash crash".

The IMF raised 2017 growth forecasts for the US as well - up 0.1% to 1.9% - but warned of uncertainty surrounding Donald Trump's presidency.

While global economic activity is widely expected to "pick up pace" in 2017 and 2018, "there is a wide dispersion of possible outcomes around the projections, given uncertainty surrounding the policy stance of the incoming US administration and its global ramifications", the report said.

Global growth projections for both 2017 and 2018 have held at 3.4% and 3.6% respectively. World output is estimated to have grown 3.1% last year.

The IMF reiterated that inward-looking policy platforms and protectionism could negatively affect economic expansion, saying that: "Increased restrictions on global trade and migration would hurt productivity and incomes, and take an immediate toll on market sentiment."