IMF says Brexit ‘pretty bad to very, very bad’

The Star (St. Lucia) - - INTERNATIONAL -

The In­ter­na­tional Mon­e­tary Fund chief has said a vote by the UK to leave the Euro­pean Union would have “pretty bad, to very, very bad” con­se­quences.

Chris­tine La­garde said she had “not seen any­thing that’s pos­i­tive” about Brexit and warned that it could “lead to a tech­ni­cal re­ces­sion”.

She echoed sim­i­lar com­ments made on Thurs­day by Bank of Eng­land gov­er­nor Mark Car­ney.

Vote Leave said the IMF had been wrong in the past and was “wrong now”.

The IMF said in a re­port on the UK econ­omy that a leave vote could have a “neg­a­tive and sub­stan­tial ef­fect”. It has pre­vi­ously said that such an out­come could lead to “se­vere re­gional and global dam­age”.

The Fund said a Brexit vote would re­sult in a “pro­tracted pe­riod of height­ened un­cer­tainty” and could re­sult in a sharp rise in in­ter­est rates, cause volatil­ity on fi­nan­cial mar­kets and dam­age London’s sta­tus as a global fi­nan­cial cen­tre.

Ms La­garde said the IMF had a duty to as­sess the risks of Brexit. It has a man­date to over­see the in­ter­na­tional mon­e­tary and fi­nan­cial sys­tem.

The Fund is ex­pected to pub­lish de­tailed es­ti­mates of the eco­nomic im­pact of a vote to leave the EU in the week be­fore the 23 June ref­er­en­dum, the tim­ing of which has been crit­i­cised by leave cam­paign­ers.

It was not just a do­mes­tic is­sue but an in­ter­na­tional one as well, Ms La­garde told a brief­ing at the Trea­sury at­tended by the Chancellor, Ge­orge Osborne.

“I don’t think that in the last six months I have vis­ited a coun­try any­where in the world where I have not been asked ‘what will be the eco­nomic con­se­quences of Brexit?’ she said.

Asked if the Trea­sury had had any in­put into the IMF’s con­clu­sions, Ms La­garde re­sponded: “Heck no! If you are sug­gest­ing that, you don’t know the IMF.”

Priti Pa­tel MP, who is back­ing the leave cam­paign, said the IMF was “wrong then and they are wrong now. It ap­pears the Chancellor is cash­ing in favours to Ms La­garde in or­der to en­cour­age the IMF to bully the British peo­ple.”

Lord La­mont, a for­mer chancellor, said: “This daily avalanche of in­sti­tu­tional pro­pa­ganda is be­com­ing lu­di­crous and piti­ful. Im­por­tant in­sti­tu­tions are be­ing politi­cised and used to make blood­cur­dling fore­casts.

“There are plenty of re­spected in­di­vid­ual economists, plenty of re­spected pro­fes­sional in­vestors, and plenty of en­trepreneurs who take a very dif­fer­ent view from Chris­tine La­garde and who have prob­a­bly been bet­ter at fore­see­ing the fu­ture than the IMF.”

Bri­tain Stronger in Europe chair­man Lord Rose said: “This is yet another eco­nomic ex­pert that agrees Bri­tain is stronger in Europe, adding to the com­ments of the Bank of Eng­land.”

For­mer Trea­sury min­is­ter Lord Myn­ers, who backs stay­ing in the EU, added: “Every ma­jor in­de­pen­dent eco­nomic in­sti­tu­tion, from the Bank of Eng­land to the IMF, has made it clear that leav­ing the EU would dam­age the UK econ­omy. This is yet more ev­i­dence that leav­ing is a risk we can­not af­ford to take.”

The Fund said it ex­pected UK growth to fall be­low 2% for the full year in 2016 be­fore re­turn­ing to an av­er­age of 2.25% over the medium term. How­ever, the IMF said that this “broadly pos­i­tive” fore­cast was sub­ject to no­table risks, the big­gest of which was the EU ref­er­en­dum, but also the low level of house­hold sav­ings, high lev­els of house­hold debt, a wide cur­rent ac­count deficit and con­cerns that pro­duc­tiv­ity growth will not rise sig­nif­i­cantly.

Con­cerns about a pos­si­ble Brexit may have af­fected UK mar­kets in re­cent months, ac­cord­ing to the Fund. It pointed to a 40% de­cline in the num­ber of com­mer­cial real es­tate trans­ac­tions in the first three months of the year.

De­cid­ing whether to re­main in the EU was a choice for vot­ers to make, the IMF said, adding that “their de­ci­sions will re­flect both eco­nomic and noneco­nomic fac­tors”.

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