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World Bank President Blames Brexit for Slow Growth, Bank of England Cuts Interest Rate

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Bad news Brexit continues to leave the global economy in a cloud of uncertainty.

World Bank President Dr. Jim Yong Kim said this week that Brexit—Britain’s decision to bail on the European Union—has had a negative impact on the global economy, which has created difficulties for developing countries.

“Anytime that there is this kind of uncertainty, you see a flight of capital to safety and that’s usually away from the developing countries, so access to capital is much more difficult,” Kim told the BBC’s World at One. “I think everyone hopes that the outlook will be brighter soon, but Brexit, unfortunately, is just one factor among many that are affecting the global economy.”

Much of the growth from emerging markets from 2008 to recently has come from emerging markets, but according to Kim, the recent drop in commodity prices has curbed that growth.

“Commodity prices are going to stay low for some time, and because of that the commodity exporters are having an extremely difficult time,” Kim said. “Commodity importers in developing countries are doing fairly well but if you put Brexit on top of these other trends that had such a difficult impact on developing countries, we’re looking at slow growth and prospects that are not nearly as bright as they were even a few months ago.

In other Brexit news, the Bank of England cut interest rates for the first time in seven years and has plans to revive a stimulus program to keep the country’s economy from sliding into recession at the hands of Brexit.

A statement Thursday said the bank rate would be cut 0.25%, a new term funding scheme would help “reinforce the pass-through” of that cut in the bank rate, and that a purchase of up to 10 billion pounds of U.K. ($13.1 billion) corporate bonds would help stimulate the economy.

“Following the United Kingdom’s vote to leave the European Union, the exchange rate has fallen and the outlook for growth in the short to medium term has weakened markedly,” the bank said in a statement. “Although the weaker medium-term outlook for activity largely reflects a downward revision to the economy’s supply capacity, near-term weakness in demand is likely to open up a margin of spare capacity, including an eventual rise in unemployment.”

As many as 250,000 people are expected to lose their jobs by the end of 2018, despite the stimulus measures, prices will rise as inflation hikes to 2.4% from a current 0.5%, with the fall in the pound making import costs higher, and output from the country will likely be 45 billion pounds ($59 billion) less by 2018, according to the bank.

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