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[...]In its twice-yearly World Economic Outlook, the IMF reduced the UK’s growth forecast for 2017 by 0.3 percentage points, to 1.7 per cent — well below the average growth rate in other advanced economies. The forecast is in line with an initial assessment first published in July.
The fund also sharply reduced its estimate of the UK’s long-term growth outlook on Tuesday. [...]
Maurice Obstfeld, chief economist at the IMF, said the reduction in the fund’s long-term outlook for the UK from an annual growth rate of 1.9 per cent to 1.7 per cent was a direct consequence of leaving the EU. “We forecast in the pre-referendum period, as did others, there would be long run negative effects on the British economy,” he said. “I think we’re starting to see those.”
[...] While the IMF expects the global economy to accelerate next year, it is predicting a further slowdown in the UK, to 1.5 per cent growth, for 2018. The IMF’s projection is broadly in line with consensus, but significantly more optimistic than the recent 1 per cent growth forecast by the Organisation for Economic Co-operation and Development.
The IMF’s cut to its long-term growth assumptions will pile pressure on the UK’s Office for Budget Responsibility to do the same. Treasury officials have already said Mr Hammond is facing “a bloodbath” in the public finances in his Budget next month, as weak economic forecasts derail the government’s plans.
[...] The fund said on Tuesday that in contrast to the UK, most of the world’s advanced economies were currently enjoying the best period of growth since the financial crisis.
“Growth in most of the other advanced economies, with the notable exception of the UK, picked up in the first half of 2017 from its pace in the second half of 2016, with both domestic and external demand contributing,” the IMF said in its World Economic Outlook.
“The UK, where the strong depreciation of the pound since last summer has passed through into higher consumer prices, is an exception to this pattern [of low inflation in other countries].”
The IMF said the squeeze on household finances in the UK had hit growth in the first two quarters of this year, and “the medium-term growth outlook is highly uncertain and will depend in part on the new economic relationship with the EU and the extent of the increase in barriers to trade, migration and cross-border financial activity”. [...]
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World Economic Outlook October 2017