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IMF: EU exit by UK could cause severe damage

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Another contentious referendum, this time in UK! Will change the face of E.U! Looks like the impact of Brexit on the rest of EU would be more profound than that the impact likely on UK!

IMF: EU exit could cause severe damage

  • 12 April 2016

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.
Vote Leave said the IMF had been "consistently wrong" in past forecasts.
The IMF, 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% growth in the UK this year, compared with its January estimate of 2.2%. For next year, it expects 2.2% 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.
However, 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."

Analysis by BBC economics editor Kamal Ahmed:

Maurice Obstfeld, economic counsellor to the International Monetary Fund and the organisation's chief economist, says there could be "severe regional and global damage" if Britain were to vote to leave the European Union.
An exit would present "major challenges" and a prolonged period of uncertainty which would "weigh" - that is have a negative effect - on confidence and investment.
Market volatility could increase, trade could be damaged and economic growth undermined.

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