IMF says ‘Brexit’ uncertainty to dampen near-term growth outlook

By David Lawder

WASHINGTON (Reuters) – Uncertainty over Britain’s looming departure from the European Union will dampen near-term economic growth for the UK and the rest of Europe and affect output globally, a spokesman for the International Monetary Fund said on Thursday.

IMF chief spokesman Gerry Rice told a regular news briefing that market movements following last week’s vote, including for currencies, “were large but not excessively disorderly.”

Rice said central bankers should stand ready to act to add liquidity or reduce excess volatility if the uncertainty over the Brexit vote threatens to further hurt global growth.

“It’s clearly created a significant uncertainty for the global economy that we think is likely to dampen growth in the near term. And we need to be ready, all of us policymakers, with decisive actions that can help mitigate that as much as possible.”

He said the effects of the Brexit vote uncertainty would be incorporated into an update of the IMF’s World Economic Outlook forecasts due to be released on July 19.

In April the IMF cut its 2016 global growth forecast for the fourth time in a year, to 3.2 percent from 3.4 percent amid weakening global demand and geopolitical risks.

A fifth straight global growth markdown looks almost certain by the IMF. Last week, it slightly reduced its U.S. growth forecast, and an IMF official said on Wednesday that Britain’s EU vote would likely cause it to cut its growth forecast for Germany.

Rice told reporters that the IMF was urging both Britain and the European Union to work together toward a “smooth and predictable transition” of their relationship. But he said the IMF was not taking a position on whether Britain should soon trigger the “Article 50” process that starts formal separation negotiations with a two-year deadline, adding that it was up to the British government to decide.

“A quick agreement that is prudent and acceptable to all would of course be optimal,” Rice said. “But on the other hand, and I want to emphasize the other hand, that rushing to a bad outcome or a negative outcome would not be in anyone’s interest.”

(Editing by Chizu Nomiyama and Jeffrey Benkoe)