IMF sees no-deal Brexit as global risk 'trigger' amid growth downgrade
21 January 2019, 11:53 | Updated: 21 January 2019, 15:02
The International Monetary Fund (IMF) has further downgraded its global forecast for this year - warning a "no-deal" Brexit could trigger even lower growth.
In an update to its World Economic Outlook the organisation predicted global growth of 3.5% for 2019 - a fall of 0.2% - the lowest level for three years.
The latest downwards revision came after the IMF cut forecasts in October amid concerns over the US-China trade war.
It said the lower figure reflects a "further softening in momentum", particularly in Germany and Italy.
The new forecast cut 0.3% from overall eurozone growth - leaving it at 1.6%.
The report, released ahead of the annual World Economic Forum in Davos, warned that shaky financial market sentiment and global output would deteriorate if trade tensions rose further and other factors came into play.
Those included the prospect of the UK leaving the EU in March without a deal and China's economy slowing further.
Figures released by Beijing earlier on Monday put GDP growth in 2018 at 6.6% - the weakest annual performance for 28 years for the world's second-largest economy.
The IMF continued to see the UK economy growing 1.5% amid the Brexit fog - saying there was "substantial uncertainty" over that figure - but raised its forecast by 0.1% to 1.6% for 2020.
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The eurozone's major economies are particularly exposed to any Brexit cliff-edge and are, like the UK, already feeling the pinch but for different reasons.
Germany is facing the prospect of a recession as international demand for its goods falls amid trade tensions with the US and China's slowdown.
The IMF also pointed to pressures on Italy's economy from weak domestic demand and higher borrowing costs as its government battles Brussels over its budget plans.
The report also noted a hit to output in France from the union backlash against President Emmanuel Macron's reform programme and the subsequent "yellow vest" protests which brought violence to on the streets.
It made clear that a swift resolution to the US-China trade war was needed if developing and developed countries' economies were to limit the damage. The IMF also urged nations to get a grip on their debt.
Its managing director Christine Lagarde told reporters at a news conference in Davos that while there was no prospect of recession in sight, policymakers must "address (the) remaining vulnerabilities and be ready for a serious slowdown".
The report added: "The main shared policy priority is for countries to resolve cooperatively and quickly their trade disagreements and the resulting policy uncertainty, rather than raising harmful barriers further and destabilising an already slowing global economy.
"Across all economies, measures to boost potential output growth, enhance inclusiveness, and strengthen fiscal and financial buffers in an environment of high debt burdens and tighter financial conditions are imperatives."
(c) Sky News 2019: IMF sees no-deal Brexit as global risk 'trigger' amid growth downgrade