The IMF weighs in on the health of the UK economy

by | 20 Dec, 2017

Christine Lagarde of the IMF

The head of the International Monetary Fund Christine Lagarde was in London today to present the organization’s annual ‘health check’ of the UK economy.

The institution welcomed progress on Brexit negotiations but warned the time frame for Britain to organize a deal was ‘ambitious’.

Other public bodies including the Office for Budget Responsibility and the Office for National Statistics have already presented research showing Britain’s growth prospects are weaker than previously thought. The IMF have forecast a slightly higher growth rate of 1.5% for next year compared to the OBR, but the sentiment is generally similar overall.

The institution said in its published statement: “Despite a strong recovery in global growth and supportive macroeconomic policies, the impact of the decision to exit the European Union has weighed on private domestic demand.”

Lagarde said uncertainty over the Brexit deal was causing UK firms to delay investment plans.

She also said rising inflation, caused by the fall in the pound, and stagnant wages were squeezing spending power.

Last year, the IMF said Brexit would trigger a UK recession, echoing the calls of major banks and the then Chancellor George Osborne, who warned of dire economic consequences in the event of a vote to leave.

In an unprecedented forecast, the organization said “In the adverse scenario of long negotiations and a default to the trade rules of the World Trade Organisation, GDP plunges by 5.5% in 2019.”

So far, though negotiations have been frought, quantifiable progress has been made on both sides, so though last years forecast may still come to pass, it seems highly unlikely given the current climate and concessions the British government has already made to the European Union.

Elsewhere, in British stock markets this Wednesday, the FTSE100 is higher than its counterparts the CAC40, FTSE MIB and Stoxx 50, but the DAX leads European indices. Mondi Plc is the top rising stock on the FTSE after it was upgraded to a ‘buy’ rating by Goldman Sachs, who see a potential 19.3% upside to the shares. Deutschebank also upgraded the stock from ‘hold’ to ‘buy’, citing the fact it is significantly cheaper than its peers after a strong dip in the share price in the latter half of this year.

Mondi plc is an international packaging and paper group employing over 24,400 people worldwide

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ALL RIGHTS RESERVED © INVSTR LTD. 2018

Risk Disclosure:
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US-traded securities, including fractional trading, are provided to Invstr users by DriveWealth LLC, a regulated member of FINRA/SIPC. DriveWealth may not establish investment accounts to residents of certain jurisdictions. For more information, including disclaimers, risk and transaction fees click here.
India account traded securities are provided by SIC Stocks & Services PVT Ltd. SIC does not make any personal recommendations to buy, sell or otherwise deal in investments. Investors make their own investment decisions. The services and securities provided by SIC may not be suitable for all customers and, if you have any doubts, you should seek advice from an independent financial adviser. For more information and disclaimers, click here.

 

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