IMF chiefs warned the UK’s decision to leave the EU would seriously hamper growth prospects in the region.
Before the Brexit vote, the IMF forecast a 1.7 per cent expansion for the eurozone.
However, post Brexit the organisation revised that down to 1.6 per cent this year and 1.4 per cent next year.
The IMF warned of economic chaos in the event of a Leave victory and has urged a “smooth transition” for post-EU Britain.
The international organisation said: “The euro area is at a critical juncture. Muddling through is increasingly untenable.
“Unless collective problems are solved, the euro area is likely to suffer repeated bouts of economic and political instability leading to crises of confidence and economic setbacks.”
In the damning statement, it said the migrant crisis could even spell the end of free movement and warned that other countries in the bloc could want their own referendums following the Brexit vote.
A Nobel Prize winning economist even said that Europe may have to “abandon the euro”.
The economist, Professor Christopher Pissarides, has said that the uncertainty would reduce investment and hit job creation.
His warnings came as:
French bank Societe Generale analyst warned Italy and France could quit the single currency EU
Rating agency Moody’s said the future of the entire EU was at risk
Banks across Europe came under increasing stress
The world’s biggest hotel group predicted that the fall in the pound would lead to a tourist boom for the UK.
But the IMF has also said that the outlook would be even worse if there are long, drawn-out negotiations between the UK and the EU.
Mahmood Pradhan, deputy director of the IMF's European Department, said: "If that risk aversion is prolonged, we think the growth impact could be larger and at this point, it is very difficult to tell how long that period lasts.”
The Washington-based fund hightlighted the UK's importance as a trading partner for the EU as the destination for 13 per cent of EU exports.