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IMF says Brexit uncertainty likely to dampen global growth

Xinhua, July 1, 2016 Adjust font size:

The International Monetary Fund (IMF) on Thursday warned that significant uncertainty over Britain's vote to leave the European Union (EU) is likely to dampen economic growth in Britain, Europe and the rest of the world.

"I would say Brexit has created significant uncertainty, and we believe this is likely to dampen growth in the near term, particularly in the UK but with repercussions also for Europe and the global economy," IMF spokesman Gerry Rice said at a regular press briefing.

Rice said "one notable source of this uncertainty" concerns the terms of the future relationship between the UK and the EU and how the new relationship will impact business.

Following a decision to exit the EU, Britain would need to negotiate the terms of its withdrawal and a new relationship with the EU.

"Prolonged periods of uncertainty and associated declines in consumer and business confidence would mean even lower growth," he said, noting that policymakers in the UK and the EU "have a key role to play" to make a smooth and predictable transition and help reduce the uncertainty.

Rice said market movements immediately following Britain's referendum last week "were large but not excessively disorderly," and the IMF strongly supports the commitments made and the steps taken by major central banks to "provide liquidity and curtail excess financial volatility."

"More broadly, we think policymakers need to stand ready to act should the impact of financial market turbulence and higher uncertainty threaten to materially weaken the global outlook. Decisive policies will make a difference," he added.

The IMF had warned before the referendum that the British economy could shrink 0.8 percent in 2017 if it leaves the EU.

Spillover from the British exit would be felt mostly by EU countries that have close trade and investment links with the country, including Ireland, Cyprus, Malta, the Netherlands and Belgium, according to a report released by the IMF earlier this month. Endit