IMF head calls for quick end to Brexit uncertainty

  • AP, Beijing
  • Updated: Jul 23, 2016 00:50 IST
International Monetary Fund (IMF) Managing Director Christine Lagarde during a press conference in Beijing, Friday. (AP)

The head of the International Monetary Fund called on Friday for quick action to end uncertainty over Britain’s vote to leave the European Union, which she said is dampening global economic growth.

The IMF cut this year’s global growth forecast by 0.1 percentage points to 3.1% in a report released this week due to the shockwaves of the British vote, said Christine Lagarde.

Lagarde spoke after meeting with the Chinese premier, Li Keqiang, and leaders of the World Bank, the World Trade Organisation and other bodies ahead of this weekend’s gathering of finance officials of the Group of 20 major economies.

“Our first and immediate recommendation is for this uncertainty surrounding the terms of Brexit to be removed as quickly as possible so that we know the terms of trade and the ways in which the United Kingdom will continue to operate in the global economy,” said Lagarde at a news conference.

Lagarde said that before the British vote, the IMF had been preparing to raise its global growth forecast by 0.1 percentage points due to improvement in Japan, China and the 17-country euro zone.

“Unfortunately, the United Kingdom decided to go for Brexit,” said Lagarde, a former French finance minister. “This is disappointing.”

Investors are watching the G20 meeting for any sign the United States, Germany, China and other major economies may agree on joint action to accelerate a weak global economic recovery.

A similar meeting in February in Shanghai ended with a joint statement that said coordinated action was impossible because major countries were at different points in their economic cycles. Some investors believe envoys in Shanghai agreed secretly to weaken the dollar to spur trade but there has been no official confirmation of that.

The final statement from this weekend’s gathering in Chengdu in China’s southwest “will be under scanner for any hints of policy coordination — monetary or fiscal,” Citigroup economists said in a report.

US treasury secretary Jacob Lew, speaking to reporters in Athens before flying to China, downplayed the likelihood of joint action.

“I don’t think this is a moment that calls for the kind of coordinated action that occurred during the Great Recession in 2008 and 2009,” said Lew. “It really is a moment where we each need to do what we can to ensure that where growth is soft it gets stronger and that prospects for the medium- and long-term are improved.”

Lew appealed for close integration of Britain and the EU in the event of a split.

“The best outcome is one that maximizes the integration of the UK and Europe and — because it’s likely to be a process that, at best, goes well beyond weeks or months — to have the nature of the discussion to be characterised by amicable, pragmatic engagement where the focus is on maximizing integration and cooperation.”

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