IMF EU referendum warning 'very sobering' because it is usually 'over-optimistic'

The IMF warned on Tuesday that UK growth in 2016 will be 1.9 per cent, down from 2.2 per cent

International Monetary Fund Managing Director Christine Lagarde delivers introductory remarks at the "Financial Inclusion: Macroeconomic and Regulatory Challenges" seminar at the IMF Headquarter in Washington (International Monetary Fund)

The International Monetary Fund’s report that the UK will grow slower than expected in 2016 is particularly worrying because the organisation is considered to be generally optimistic in its outlook.

That’s the view of Professor Ngaire Woods, a former adviser to the IMF board and the dean of the Blavatnik School of Government.

“The IMF is almost always over-optimistic. You take their warnings very seriously. It is often criticised for not warning seriously enough. So this is a very sobering report,” Professor Woods said.

The IMF warned on Tuesday that UK growth in 2016 will be 1.9 per cent, down from 2.2 per cent predicted in January, as uncertainty over the EU referendum in June weighs on the economy.

The IMF said that the very fact of hosting a referendum, regardless of whether or not there is a yes vote, had already had an impact on economic growth in the UK.

This forecast is lower still than the figure given by the Office for Budget responsibility in the March Budget, which put growth at 2 per cent this year, down from 2.3 per cent in 2015.

George Osborne said the report was the “clearest independent warning” of what could happen to Britain if it votes to leave the EU.

“If the British economy is hit by the mere risk of leaving the EU, can you imagine the hit to people’s income and jobs if we did actually leave?” he said.

But David Buik, a market commentator from Panmure Gordon, said that the IMF wanted the UK to remain to prevent the breakup of the EU.

“Let’s face it, the IMF is a branch office of the EU. If the UK leaves that could precipitate the break-up of the EU,” Buik said.