The International Monetary Fund has reduced its growth forecast for the eurozone as a result of the Brexit vote.
It said on Friday that the new climate of uncertainty in the eurozone will harm consumer and investor confidence, slow economic growth and add to financial market volatility.
The outlook for GDP growth was downgraded to an average of 1.6% for the whole of the single currency bloc.
The IMF said that 13% of euro area exports are to the UK, but it anticipates that future demand from Britain will be less.
According to the Fund’s report: “Growing political divisions and scepticism have put the euro area at a critical juncture. The usual approach of muddling through appears increasingly untenable, raising the risks of stagnation and further fragmentation.”
It added that the risks had increased of economic backsliding amid “growing political divisions and euroscepticism”. High public and private debt will add to the pressure on growth.
It said there was little capacity “to cope with adverse shocks” because interest rates are already at record lows and government finances are stretched.
Both the IMF and credit rating agency Moody’s warned of the impact of nationalistic and protectionist movements within the EU.
In a recommendation that will be welcomed by Portugal’s energy consumers, the IMF also stated that Portugal freezes any further investment by REN in the national power supply network.
The recommendation in clear: while Portugal’s electricity price are sky high in a low wage country, the Chinese controlled distribution company should not be allowed to spend any more money on the network until its debts are paid off.
REN earns its money from regulated revenues so the higher its spending on investment the higher the bills end up for customers. This has led to a policy of spending for spending's sake as the customer picks up the tab.
The IMF has looked at REN's investment plan 2016-2025 issued in February 2016 and, along with the energy regulator, suggests the Government does not approve the plan to spend €1.17 billion in the next decade as it is deemed excessive.
