IMF defends Brexit warnings, UK heads for ‘soft landing’

The International Monetary Fund’s chief economist Maurice Obstfeld has defended the grim warnings the fund made about the potential impact of the UK voting to leave the European Union.

It would have been “malpractice” not to have considered worst-case scenarios, Obstfeld said.

IMF has nudged up its 2016 growth forecast for the UK and yet cut the 2017 forecast once again.

The IMF also said on Tuesday that it expects the UK to grow at 1.8 percent for 2016 – a mild higher from the 1.7 percent it forecast in its July update.

Obstfeld defended the fund’s projections, saying the UK economy had entered a “soft landing” this year.

“This was “one of our scenarios, and the one we are happier to have seen than the alternative worst scenarios”, said Obstfeld.

Obstfeld highlighted the role of the Bank of England in helping stabilise the post-Brexit economy.

“Partially because of the strong policy response from the Bank of England we are looking at a pretty soft landing for 2016”, he said.

The IMF chief economist said growth would be lower in 2017 as exit negotiations begin and there was already “some evidence of deferred investments from businesses” which will also begin to bite next year.

“We could not have dismissed the outcome [of the referendum]”, said Obstfeld.

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