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No-deal Brexit could tip UK and EU into recession, IMF says

A no-deal Brexit could see both Britain and the EU slide into a two-year recession in a worst-case scenario, the International Monetary Fund (IMF) has said.

Read more: IMF director says majority of countries will see growth slow in 2019

The UK economy will grow by less than previously thought even with a deal, the Washington-based organisation predicted, as it slashed its growth forecasts for all of the worlds advanced economies amid a global slowdown.

A no-deal outcome that led to severe border disruptions and a quick erection of tariffs would cause UK GDP to fall by 1.4 per cent and 0.8 per cent in the first and second years, according to the organisation. The EUs GDP would be 0.2 per cent and 0.1 per cent lower in such a scenario.

The IMF said a no-deal outcome would have a total negative effect on UK GDP of 3.5 per cent by 2021 compared to the current projection.

The IMFs report said the economy would suffer as trade tariffs rose and non-tariff costs involved with customs and regulations also increased, including higher costs for the UK financial sector.

UK GDP is set to expand 1.2 per cent in 2019 should it leave the EU with a deal, 0.3 percentage points less than the IMF predicted in January as Brexit uncertainty and a global slowdown weigh on the country's prospects.

In more bad news for Europes biggest economy, the IMF said Germany will now grow just 0.8 per cent in 2019, meaning the organisation has cut its growth prediction for the country by over half since October in two consecutive downgrades.

Last week Germanys manufacturing sector was shown to have sharply contracted in March, while on Monday it was revealed that imports and exports were both lower than expected.

Italy will be the slowest-growing advanced economy in 2019, the IMF said, achieving feeble growth of 0.1 per cent. Meanwhile US GDP will grow 2.3 per cent in 2019, 0.2 percentage points lower than the IMFs January report foresaw.

Gita Gopinath, director of the research department at the IMF, pointed to “the escalation of US-China trade tensions, needed credit tightening in China… disruptions to the auto sector in Germany, and financial tightening” as reasons for the global slowdown.

However, the IMF predicted there would be a pick-upRead More – Source
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