“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 spokesperson Gerry Rice said.
Rice urged policy makers to act decisively while dealing with the situation.
He said policy makers need to stand ready to act, if the impact of financial market turbulence and higher uncertainty threaten to materially weaken the global outlook, adding that “decisive policies will make a difference.”
“Prolonged periods of uncertainty and associated declines in consumer and business confidence would mean even lower growth and again, policymakers in the UK and the EU have a key role to play in helping to reduce the uncertainty during this period,” he said.
The IMF also raised an alarm over the future relationship between European Union and Britain. According to the IMF, the terms of exit will also impact global economy.
“One notable source of this uncertainty concerns the terms of the future relationship between the UK and the EU, and these relate to questions about how long it will take to decide those terms, how the new relationship will impact business, and other actors,” Rice warned.
The increase in political uncertainty in the UK will also add to the trouble.
However, Rice also said IMF “strongly supports” the commitments made and steps taken by major central banks, including the Bank of England, the European Central Bank, the US Fed and the Bank of Japan, among others, to provide liquidity and curtail excess financial volatility.
Despite sending out the warning, the IMF has urged both the UK and the EU to work collaboratively towards a smooth and predictable transition.
(With inputs from PTI)