IMF Upgrades U.K. 2017, 2018 Growth Forecast as Brexit Fears Ease

The International Monetary Fund on Tuesday raised its forecast for U.K. growth this year, saying the economy has proved more resilient to June's Brexit vote than it expected.

The fund added, though, that it still anticipates subdued growth in Britain in the years ahead, as voters' 2016 decision to take the country out of the European Union will likely weigh on trade and investment.

The IMF said in its latest World Economic Outlook that it forecasts growth of 2.0% in the U.K. in 2017, a faster pace than the 1.5% annual growth it predicted in January.

It also upgraded its growth forecast for 2018, saying it expects the U.K. to expand 1.5% next year, compared with a January projection of 1.4%.

The changes "reflect the stronger-than-expected performance of the U.K. economy since the June Brexit vote," the IMF said.

The fund said it still expects the referendum decision to bear down on growth but that the "negative effects" will materialize more gradually than it previously thought. Those effects include weakened consumer spending power from a battered pound, higher barriers to trade from exiting the EU's single market, and the likely relocation to other European capitals of parts of Britain's large financial services industry, the fund said.

Proponents of Brexit say the U.K. will flourish outside the EU, where it will be able to cut red tape and ink new trade deals with faster growing parts of the world.

U.K. Prime Minister Theresa May on Tuesday said she would this week seek parliament's approval to hold a general election June 8 in an effort to strengthen her government's position as Brexit approaches. Mrs. May kicked off two years of divorce talks with the EU at the end of March, putting the country on track to leave the bloc by early 2019.

Write to Jason Douglas at jason.douglas@wsj.com

(END) Dow Jones Newswires

April 18, 2017 09:33 ET (13:33 GMT)