Belfast Telegraph

IMF raises forecast for UK economic growth

The International Monetary Fund (IMF) has raised its UK growth forecast for the second time this year, saying the economy held up in the wake of the Brexit vote.

In its latest World Economic Outlook, the IMF said it now expects the British economy to grow by 2% in 2017, up from January's forecast of 1.5%.

That puts Britain among the fastest growing advanced economies this year, trailing closely behind the US and Spain, which are expected to grow 2.3% and 2.6%, respectively.

"Growth...remained solid in the United Kingdom, where spending proved resilient in the aftermath of the June 2016 referendum in favour of leaving the European Union," the IMF said.

Britain's economy is then expected to slow to 1.5% in 2018 - though that figure was revised up from January's projections for 1.4% growth.

Chancellor Philip Hammond said: "The fundamentals of our economy are strong and we continue to invest in the skills needed for a stronger and fairer Britain.

"We are now forecast by the IMF to be the second fastest growing major advanced economy this year.

"In Washington this week I will be talking to our international partners about how we can carry on increasing global economic growth, with Britain again playing an active and engaged role in the global economy."

However, the IMF warned that Britain's economy is still likely to suffer as a result of Brexit.

It said that that the economic projections for the UK "points to a more gradual materialisation than previously anticipated of the negative effects of the United Kingdom's decision to leave the European Union".

The Washington-based group said it expects a drop in household spending power as consumers grapple with rising inflation following the post-Brexit vote collapse of the pound.

Sterling's devaluation has raised import prices for businesses, which have started to pass on costs to consumers.

Last month, data from the Office for National Statistics (ONS) showed household saving rates hit record lows of 3.3% in the fourth quarter of 2016, as consumers tried to keep up spending despite rising prices.

"Though highly uncertain, medium-term growth prospects have also diminished in the aftermath of the Brexit vote because of the expected increase in barriers to trade and migration, as well as a potential downsizing of the financial services sector amid possible barriers to cross-border financial activity," the IMF added.

Meanwhile, the organisation's forecast for global growth in 2017 was nudged higher from 3.4% to 3.5% thanks in part to "buoyant financial markets and a long awaited recovery in manufacturing and trade".

Its 2018 projection held steady at 3.6%, but the IMF noted longer term growth forecasts remain "subdued" as protectionist movements starts to threaten global trade.

Maurice Obstfeld, economic counsellor for the IMF, said: "Mainly in advanced economies, several factors-lower growth since the 2010-11 recovery from the global financial crisis, even slower growth of median incomes, and structural labour market disruptions-have generated political support for zero-sum policy approaches that could undermine international trading relationships, along with multilateral cooperation more generally."

The warnings follow events like the Brexit vote and the US election of President Donald Trump, which have promoted more domestically-focused policies on business and trade.