Investing.com – Although the International Monetary Fund (IMF) cut growth forecasts on Tuesday in the wake of U.K.’s decision to leave the European Union (EU), known as a Brexit, the organization noted that the U.S. economy would remain virtually unscathed.
“The impact of Brexit is projected to be muted for the United States, as lower long-term interest rates and a more gradual path of monetary policy normalization are expected to broadly offset larger corporate spreads, a stronger U.S. dollar, and some decline in confidence,” the IMF said in its updated World Economic Outlook (WEO).
The Fund did cut its forecast for U.S. growth this year to 2.2%, from April’s projection of 2.4%, but explained that the revision was due to a weaker than expected performance in the first three months of the year.
Overall, the global growth forecasts for 2016 and 2017 were both marked down by 0.1 percentage points relative to the April 2016 WEO, to 3.1% and 3.4%, respectively.
The U.K. was hardest hit with the IMF cutting its forecast to 1.7% from the prior 1.9% for this year and slashing 2017 growth to 1.3% from April’s estimate of 2.2% due to the Brexit.
But the IMF warned that those estimates were based on the assumption that the U.K. and the EU would reach a deal with limited trade barriers and that the worst case scenario could imply a recession for Britain.