European Union

This chart shows how much Brexit could cut global growth

A woman with a painted face poses for a photograph during a demonstration against Britain's decision.

A woman poses for a photograph during a demonstration against Britain's decision to leave the European Union Image: REUTERS/Neil Hall

Mark Jones
Head of Digital Content, The World Economic Forum
Share:
The Big Picture
Explore and monitor how European Union is affecting economies, industries and global issues
A hand holding a looking glass by a lake
Crowdsource Innovation
Get involved with our crowdsourced digital platform to deliver impact at scale
Stay up to date:

European Union

The International Monetary Fund (IMF) was expected to raise its estimate of global economic growth by 0.1% because the early months of the year went better than expected, particularly in major developing economies like China, Russia and Brazil. But Brexit has forced a complete rethink at the Fund.

Central scenario

The IMF now forecasts 3.1% global growth this year and 3.4% next year - that’s 0.1% lower than its April prediction for both years.

The assumption is that there'll be a modest reduction in confidence, no major new economic barriers from UK exit negotiations with the EU (including the relocation of financial institutions to the EU) and no major financial markets sell-off.

But the Fund regards the risks as difficult to assess and has outlined two other scenarios - ‘downside’ and ‘severe'.

Image: IMF

Downside scenario

Under the downside scenario, global growth is 0.3% lower this year and 0.4% lower in 2017 than April’s forecast. That’s due to much tighter credit conditions, lower business and consumer confidence, and a portion of the UK financial services sector relocating to the euro area.

Severe scenario

The least likely scenario sees global growth cut sharply by 0.5% this year and by 0.7% in 2017. That’s the result of even tighter credit conditions in advanced European economies, a bigger impact on confidence, difficult trade negotiations between the UK and EU that result in a reversion to the World Trade Organisation’s rules, and a much bigger proportion of the City relocating to Europe.

The Fund notes that the impact of Brexit is likely to be most keenly felt within the more advanced nations of Europe and that effects on major economies like the US, China and Japan will be relatively weak.

Don't miss any update on this topic

Create a free account and access your personalized content collection with our latest publications and analyses.

Sign up for free

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

Related topics:
European UnionInequality
Share:
World Economic Forum logo
Global Agenda

The Agenda Weekly

A weekly update of the most important issues driving the global agenda

Subscribe today

You can unsubscribe at any time using the link in our emails. For more details, review our privacy policy.

1:42

This EU law will make companies check their supply chains for forced labour

Kimberley Botwright and Spencer Feingold

March 27, 2024

About Us

Events

Media

Partners & Members

  • Join Us

Language Editions

Privacy Policy & Terms of Service

© 2024 World Economic Forum