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IMF says Brexit could result in severe regional and global damage

Posted in 'Banking' by Paul Anderson Riley

18 April 2016

The International Monetary Fund has provided a new outlook to the possibility of the UK leaving the European Union saying this could result in "severe regional and global damage”. They have also commented that ‘Brexit’ may unsettle trading relationships and increase economic challenges for the UK and the rest of Europe.

The main concern the IMF have voiced is the possible decrease in confidence and investment if the referendum resulted in the UK leaving the EU. The belief is that an exit could negatively impact mutual trade, financial benefits of economic co-operation and existing EU economies of scale.

Volatility in markets may also occur due the uncertainty investor’s face, the IMF comments a leave will only increase this uncertainty. The IMF previously published growth expectations for the UK of 2.2% this year, but have now cut this to 1.9%, although the growth prediction for next year remains unchanged.

The fund have provided some factors that may offset an exit saying domestic markets supported by lower energy prices and a thriving property market may reduce the impact of such a leave.

Campaign group Vote Leave have commented that the IMF have been ‘consistently wrong’ with previous predictions. Matthew Elliott of Vote leave says "The IMF has talked down the British economy in the past and now it is doing it again at the request of our own Chancellor. It was wrong then and it is wrong now…The biggest risk to the UK's economy and security is remaining in an unreformed EU which is institutionally incapable of dealing with the challenges it faces, such as the euro and migration crises."

The evaluation made by other financial analysts have not viewed the result of a UK exist so harshly. For example Moody’s say the impact is likely to be small with large changes in employment unlikely.

Paul Anderson Riley

Paul has a degree in Human Geography from Plymouth University and has a keen interest in both listening to and playing music, football and surfing.

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