World Bank Says Brexit Uncertainty May Hurt Global Economyby
Kim says decision to stay or leave is one for British voters
Lower growth forecast makes world vulnerable to uncertainty
World Bank President Jim Yong Kim cautioned that the global economy won’t cope well with uncertainty as polls show Britons remain undecided as to whether to remain in the European Union in June’s vote.
Asked about the potential impact of a vote to leave the bloc -- known as Brexit -- Kim said the decision is one for U.K. voters to take, though he noted that downgraded growth forecasts make the world economy more vulnerable. Kim said the World Bank has just downgraded its global growth forecast this year to 2.5 percent from 2.9 percent.
“Brexit is an issue for the British voters and we leave it to the British voters to decide,” Kim told a press briefing at the International Monetary Fund in Washington Thursday. “But I would just say that this is an economy, given our projections of lower growth this year, that is not going to do well with more uncertainty.”
With just over two months to go before the June 23 referendum, a potential exit is dominating the debate at the IMF and World Bank spring meetings in Washington. Kim’s comments follow Tuesday’s warning by the fund that a vote to leave could cause “severe” damage to the world economy. Polls suggest the referendum remains too close to call.
Uncertainty would continue after a vote to leave the EU, because the U.K.’s relationship with EU nations would be at risk and debated for a long time, IMF Managing Director Christine Lagarde said at a briefing after Kim’s. “It’s been a long marriage with other countries in the EU and it’s really my personal hope that that doesn’t break,” she said.
In a quarterly update to its World Economic Outlook, the IMF lowered its 2016 U.K. economic forecast to 1.9 percent from 2.2 percent. While it kept its 2017 prediction at 2.2 percent, it cited a potential Brexit as one of the key international risks and said a vote to quit the 28-nation bloc would pose “major challenges” and could do “severe regional and global damage by disrupting established trading relationships.”