IMF boss Kristalina Georgieva warns of ‘painful’ Brexit

International Monetary Fund (IMF) Managing Director Kristalina Georgieva — Image caption Brexit will have ‘spillover’ effects on other economies, says IMF managing director Kristalina Georgieva

The new head of the International Monetary Fund has warned that Brexit in whatever form will be “painful”, adding to the effects of a global slowdown.

Kristalina Georgieva said the split will hurt not only the UK and European Union, but also low income countries with economic ties to them.

IMF data show that growth has already slowed in almost 90% of the world.

“It is very obvious that this [Brexit] is going to be painful,” she told the BBC.

“It is very important that we all concentrate also on spillover impacts for the rest of the world, and I particularly worry about low-income countries that are in a significant way dependent on the European Union and the UK,” she said.

Ms Georgieva spoke to the BBC ahead of the IMF’s annual meeting in Washington next week, where members of the international lending body will discuss risks such as climate change, rising corporate debt and the cost of trade fights.

“Unfortunately this is not great news,” she said of Brexit. “And it comes at a time of compounded other factors that slow down growth.”

Trade war

The US and China are locked in a trade war over state subsidies and technology theft that has led the two sides to impose tariffs on billions of dollars worth of each other’s goods.

US President Donald Trump has also picked fights with allies such as Europe and Canada over cars, steel and aluminium.

The disputes have brought trade growth to a “near standstill” and hurt manufacturing and business investment, Ms Georgieva said.

In 2020, the IMF predicts that they will knock almost 1% off of global growth in 2020 – or roughly $700bn.

Image caption Since 2018, tariffs on billions of dollars worth of annual trade have been imposed

“What is most significant is that it is not the direct impacts of tariffs that are most harmful. Most harmful is the loss of confidence,” Ms Georgieva said.

‘Bigger loser’

The White House has said the tariffs are meant to force China to change its policies and dismissed concerns about growth, arguing that any harm to the US pales in comparison to the damage on China.

“That is not a good excuse if you can say, you know what, I’m a loser, but you’re a bigger loser than me,” Ms Georgieva said.

“I don’t think that this is what people expect from leadership.”