Confidence in prospects for the global economy has been dented following Britain’s vote to leave the European Union, with a growing view that monetary policy is a fading force and many governments now need to borrow and spend, Reuters polls showed.
Broad worries about political risks are also on the rise everywhere and not restricted just to Brexit’s repercussions and a failed coup in Turkey. The United States is entering a period of heightened uncertainty too, leading up to November elections.
The overarching worry is this more dangerous phase is coming at an unwelcome time, when central bankers don’t have anywhere near the clout they had after the collapse of Lehman Brothers to deal with another major economic or financial downturn.
“Given how fragile the global economy is nearly eight years after the start of the global financial crisis, the last thing it needed was the type of jolt provided by the UK’s Brexit vote,” wrote Janet Henry, global chief economist at HSBC.
“We suspect fiscal policy will likely have a larger role to play in many countries from here.”
Reuters polls of above 500 economists across Asia, Europe and the Americas reveal downgrades, or at best no change to growth forecasts compared with previous months, as well as an incrementally weaker inflation across most countries.