UK exit from EU could cause 'severe regional, global damage

UK exit from EU could cause 'severe regional, global damage - IMF

AGENCIES
Wednesday April 13, 2016

The EU and Britain's flags. Photo/COURTESY

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The UK's exit from the European Union could cause "severe regional and global damage", the International Monetary Fund has warned in its latest outlook.

A so-called "Brexit" would disrupt established trading relationships and cause "major challenges" for both the UK and the rest of Europe, it said.

The IMF said the referendum had already created uncertainty for investors and a vote to exit would only heighten this.

The Fund, one of the main pillars of the global economic order with a mandate to oversee the international monetary and financial system, also cut its UK growth forecast.

It now expects 1.9 per cent growth in the UK this year, compared with its January estimate of 2.2 per cent. For next year, it expects 2.2 per cent growth, unchanged from its earlier forecast.

If the 23 June referendum in the UK were to produce a vote in favour of leaving the EU, the IMF would expect negotiations on post-exit arrangements to be protracted, which it warned "could weigh heavily on confidence and investment, all the while increasing financial market volatility".

It also believes a UK exit from the EU would "disrupt and reduce mutual trade and financial flows" and restrict benefits from economic co-operation and integration, such as those resulting from economies of scale.

But the Fund said that domestic demand, boosted by lower energy prices and a buoyant property market, would help to offset the impact on UK growth ahead of the EU referendum.

Chancellor George Osborne said the IMF's comments reinforced the case for staying. "The IMF has given us the clearest independent warning of the taste of bad things to come if we leave the EU," he said.

Meanwhile, Prime Minister David Cameron tweeted: "The IMF is right - leaving the EU would pose major risks for the UK economy. We are stronger, safer and better off in the European Union."

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