IMF lowers EU economic projection on Brexit concerns

The United Kingdom’s decision to leave the European Union, the refugee crisis, recent terror attacks, and low inflation levels were among the reasons the Washington-based fund lowered its projection for Eurozone GDP growth in each of the next three years.    The International Monetary Fund (IMF) on Friday lowered its economic growth projections for the European Union in each of the next three years.
   The Washington-based fund dropped its Eurozone gross domestic product (GDP) growth projections to 1.6 percent for this year, 1.4 percent in 2017 and 1.6 percent in 2018, all down from 1.7 percent previously.
   The IMF cited the United Kingdom’s recent referendum to leave the EU as the primary reason for the downward revision, along with the ongoing refugee crisis, recent terror attacks, low levels of inflation and weakness on the part of some European banks.
   “The euro area is at a critical juncture,” said Mahmood Pradhan, IMF mission chief for the Euro area. “The progress made during the acute phase of the crisis and the recovery should not lead to complacency about the underlying challenges. Policymakers should seize this moment to reverse the rising tide of Euroscepticism and strengthen the monetary union by acting together. Muddling through is increasingly untenable.”
   The “fragile” recovery that started in the EU in 2014 has strengthened on account of consumer spending as more people find jobs, lower oil prices, a neutral fiscal stance, and accommodative monetary policy, but medium-term growth prospects remain muted, said the IMF.
   “Inflation remains too low, and weak investment, still high unemployment, and the aging of the population will continue to hurt productivity, raising the risk of stagnation,” noted Pradhan.
   Recent industry reports on trade and transportation have warned of the potentially widespread impact of the so-called Brexit vote. Nonprofit public policy institute The Stimson Center said the decision could have negative implications for the Transatlantic Trade and Investment Partnership (TTIP) between the U.S. and EU, as well as the sweeping 12-nation Trans-Pacific Partnership, while Norway-based ocean procurement software provider Xeneta said the Brexit will have a negative impact across all parties involved in container shipping, from shippers, to freight forwarders and the ocean carriers themselves.