Brexit ‘could do severe regional and global damage’ by disrupting trade relationships: IMF
A British vote to leave the EU risks causing severe economic and political damage to Europe that will spill over into an already febrile world economy, the International Monetary Fund has warned.
Cutting its forecasts for global growth and for the UK and other advanced economies, the IMF listed a potential Brexit vote in June’s EU referendum as a key risk in its latest World Economic Outlook (WEO).
Maurice Obstfeld, the IMF’s chief economist, said a decision to quit the EU was a “very real” possibility and would affect economic growth even if an exit was managed smoothly.
“In the United Kingdom, the planned June referendum on European Union membership has already created uncertainty for investors; a ‘Brexit’ could do severe regional and global damage by disrupting established trading relationships,” he said.
The Washington-based Fund said economic growth was also threatened by a host of other factors, including “the tragedy of large-scale refugee inflows” to Europe, a potential reappearance of financial market turmoil, China’s difficult economic rebalancing and growing income inequality.
It used its half-yearly update on the health of the world economy to warn that the global recovery was too slow and increasingly fragile. The Fund was again forced to concede its earlier forecasts had been too optimistic.
The IMF now predicts global GDP growth will edge up only slightly this year, to 3.2%, from growth of 3.1% in 2015. That compared with a 2016 forecast of 3.4% in a January update and of 3.6% in the last WEO in October. The 2017 forecast was cut to 3.5% from, 3.6% in January.
“Global growth continues, but at an increasingly disappointing pace that leaves the world economy more exposed to negative risks. Growth has been too slow for too long,” Obstfeld told a press briefing to unveil the latest forecasts.
Since October’s outlook, investors have been spooked by another bout of turmoil on financial markets and the IMF raised the prospect of such wild swings in stock prices and other assets returning, with potential knock-on effects for the broader economy.
