While global growth projections remained on track to deliver improved output of 3.5% in 2017 and 3.6% in 2018, on a country-by-country basis, the UK was one of a handful of developed economies to have its growth prospects downgraded.
Based on the IMF’s projections, the UK economy is only expected to expand by 1.7% in 2017, just 0.1% higher than it did in 2016.
This estimate is 0.3 percentage points lower than the IMF’s previous forecast in April.
Although the IMF had more confidence in the British economy’s resiliency earlier this year, upgrading the UK’s expected growth to 1.5% in 2017 and again to 2%, softer first quarter figures and the overhang of ongoing Brexit negotiations have given the firm pause.
By contrast, the DC-headquartered fund revised up its growth projections for a number of key euro area countries, including France, Germany, Italy and Spain, based on stronger performance in the first three months of the year.
Like the UK, the IMF also amended its growth expectations for the US, from 2.3% to 2.1% in 2017 and from 2.5% to 2.1% in 2018, on the basis that President Trump’s “fiscal policy be less expansionary than previously assumed”.
The IHS Markit UK Business Outlook, also released Monday, reflected the IMF’s reservations on the heartiness of the British economy, reporting waning business confidence over the month of June.
In June, optimism in the UK fell to its lowest level since October 2011, as the net balance of private sector firms expecting a rise in business activity over the next 12 months, fell from its annual high of 52% in February to 35%.
The sharp reversal in upbeat sentiment speaks to the “deepening concerns about the path to Brexit, a renewed wave of political uncertainty and evidence of more subdued consumer spending,” said HIS Markit chief economist Chris Williamson.
