. while some of these factors have been with us for a number of years now, more recently, the downside risks facing the global economy have been compounded by the outcome of the british referendum vote, or brexit, as it is more commonly referred to. as a result of brexit, the global outlook for 2016 – 17 has worsened, as the vote added significant uncertainty to an already fragile global economic environment, and is likely to affect confidence and weigh negatively on consumption and investment. i should add that brexit has also highlighted the importance of inclusive growth, an issue which was highlighted in the latest g20 communique. bis central bankers ’ speeches the imf noted that prior to brexit, economic data and financial market developments pointed to an improvement in the outlook for a few large emerging markets and a modest upward revision to global growth for 2017 ( 0. 1 percentage point ). in the aftermath of brexit, however, the imf downgraded global growth projections by 0, 1 percentage points for both 2016 and 2017 to 3, 1 and 3, 4 per cent respectively. advanced economies were primarily responsible for the more pessimistic outlook, with the imf revising the united kingdom ’ s 2017 outlook downwards by almost a full percentage point, while the euro area ’ s outlook was downgraded by a lesser 0, 2 percentage points. with the exception of sub - saharan africa, where the imf downgraded its outlook by over 1 percentage point for 2016, mainly on account of adverse developments in nigeria and south africa ( the two largest economies ), the outlook for emerging markets has generally remained steady, with stronger than expected recoveries in russia and brazil in the forecasts. although the contribution of emerging markets to global growth has dwindled in recent years, they continue to account for around 58 per cent of global gross domestic product ( gdp ) and therefore remain significant. given that the brexit outcome was generally unanticipated, the outcome was initially followed by heightened financial market volatility and renewed risk aversion. emerging market economies were subjected to a strong negative impact from brexit, however, the emerging markets most strongly affected have been those that are highly dependent on the eu as an export market, like south africa. notwithstanding the short term financial market volatility, financial markets have since recovered and asset prices have rallied. this development was supported by a good level of preparedness by major central banks

and quick responses after the referendum, demonstrating readiness to act decisively in dealing with any fallout in the financial markets. while there has been some reprieve in financial markets, it is to be expected that until brexit negotiations have been completed or the likely outcome becomes clearer, there could be significant bouts of volatility and heightened uncertainty. this means that forecasts will be subject to further revisions as the impact of brexit unfolds, and the respective positions of the negotiating partners are revealed. heightened uncertainty is likely to spill over into financial markets, which usually means capital outflows from emerging market economies which are perceived to be more risky, as investors look for so - called safe haven assets. at the same time, however, brexit appears to have swung the monetary policy pendulum more towards an even easier stance in advanced economies, and as such, in the short term we could still witness inflows into emerging markets as investors search for higher yields. the us fed, which had embarked on a normalisation path for its monetary policy, may now slow down its pace, again adding to uncertainty and volatility. the results of their most recent deliberations will be announced tonight, and the markets are waiting to glean from their statements what the likely future trajectory of interest rates might be. it has been argued that in sub - saharan africa, brexit could potentially have severe repercussions given that the european union is one of the region ’ s biggest trade and foreign investment partners. south africa ’ s trade links are relatively small, but could suffer the most, given its strong investment and financial links with the uk and the relatively high integration of domestic markets with global financial markets. according to moody ’ s south africa has been the largest recipient of uk foreign direct investment ( fdi ) in africa, accounting for about 30 per cent of total uk investment in africa in 2014. 1 moody ’ s further assert that given south africa ’ s lowest fdi levels in 10 years in 2015, brexit - related uncertainty might delay investment decisions and introduce a downside risk to fdi inflows into south africa. 2 http : / / www. fin24. com / economy / why - sa - is - most - exposed - to - brexit - impact - moodys - 20160708. http : / / www. focus - economics. com / countries / south - africa. bis central bankers ’ speeches market expectations of even easier