IMF Report on potential Brexit impact: UK could fall into recession; risk of market disruption and credit squeeze
(Full report attached)
Potential Brexit impacts in UK
- in an adverse Brexit scenario, UK economy could shrink 5.6% by 2019: In the limited scenario, GDP growth dips to 1.4 percent in 2017, and GDP is almost fully at its new long-run level of 1.5 percent below the baseline by 2019. GDP growth falls to -0.8 percent in 2017 in the adverse scenario, and the level of GDP dips to 5.6 percent below the baseline by 2019, before uncertainty and risk effects ebb away.
- Permanently lower incomes would be associated with reduced consumption. Pass-through from a weaker pound would result in higher prices for imported goods; depreciation would mitigate economic losses to the UK somewhat by stimulating net exports, but not enough to offset declines in other expenditure categories. Fiscal savings from reduced contributions to the EU budget would likely be outweighed by lower revenues from expected lower output, resulting in a net fiscal loss.
Expectations if 'Remain' vote wins
- UK economy should rebound later this year if it votes to 'remain' in EU
Brexit effect on other nations
- The economic consequences for other countries would mainly be negative, albeit smaller than for the UK, and concentrated in the EU. Within the EU, losses would vary widely, reflecting variation in trade and financial exposures to the UK. Ireland, Malta, Cyprus, Luxembourg, the Netherlands, and Belgium would likely be most affected.