Christine Lagarde hits back at criticism of IMF's Brexit warnings

Jessica Morris
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IMF Head Christine Lagarde Holds News Conf. On Economic Policy Priorities
The IMF published three possible impacts of a Brexit vote ahead of the referendum (Source: Getty)

The head of the International Monetary Fund has hit back at criticism of the organisation's warnings about the dire impact of Brexit ahead of the vote.

Christine Lagarde, managing director of the IMF, said that its forecasts, which included Britain falling into a recession and a stock market crash, had been mitigated by action central bank worldwide.

"We have done a lot of scenario planning work in the weeks that preceded the referendum, that was clearly our job. We had various scenarios. One was our baseline, one was ... a determination to exit the European community, one was a mild scenario, one was a very adverse scenario," she said.

"We're very encouraged that because of good policies in the main, and good international cooperation between central bankers of the world, [we are] currently in the mild scenario."

A string of recent data has shown that the UK economy has performed better than expected after the referendum, and the IMF recently improved its gross domestic product forecasts for Britain this year.

The IMF's referendum analysis published days before the vote said that the UK economy could be plunged into recession, unemployment would jump and wages tumble if the UK votes to leave the EU.

In its mild scenario, where the period of uncertainty following the referendum is limited and the UK secures access to the single market, the economy would be 1.5 per cent smaller in 2021 than if it had stayed in.

But in its adverse scenario stipulated that the economy would also shrink by 0.8 per cent in 2017, compared to current forecasts of 2.2 per cent growth if the UK stays in, or 1.4 per cent growth if it secures decent terms of exit.

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