Brexit throws 'spanner in the works' of global economy - IMF

The International Monetary Fund (IMF) has cut its global growth outlook for the next two years due to the uncertainty caused by Britain's vote to leave the European Union.

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The Washington-based institution now expects the world economy to grow by 3.1 percent in 2016 and by 3.4 percent in 2017 - 0.1 percent down compared to the figures posted in April.

The UK’s 2017 growth forecast has been slashed by 0.9 percentage points, to 1.3 percent with the current year outlook changed by 0.2 percentage points to 1.7 percent.

READ MORE: Germany’s economic growth outlook at risk over Brexit – IMF

The IMF projects insignificant impact on the US economy. The fund raised its forecast for the euro area 0.1 points this year, to 1.6 percent, and lowered it by 0.2 points in 2017, to 1.4 percent.

The UK's Brexit vote may cause a “substantial increase in economic, political and institutional uncertainty” having a huge impact on investment, market and consumer confidence, according to the IMF.

The global financial agency warns that the latest projections are based on its best-case scenario concerning Brexit with more negative outcomes being distinctly possible.

READ MORE: World's oldest bank faces uphill battle with EU trying for another bailout

Under the more negative IMF scenarios global growth would drop below three percent as businesses may start moving away from Britain to the EU with Brexit sparking financial stress and dislocation.

The IMF says other major risks may include European banking crises, especially in Italy and Portugal with banks having “unresolved legacy issues.”