Uncertainty over government policies is hitting the outlook for Britain. A no-deal BREXIT would generate a large negative shock to the UK economy. Substantial uncertainty persists about the timing and nature of the withdrawal of the United Kingdom from the European Union. Particularly as concerns a possible no-deal exit which could push the UK into recession in 2020 and lead to sectoral disruptions in Europe.
Other risks – including the overall slowdown in the Chinese economy and significant financial market vulnerabilities from the tension between slowing growth, high debt and deteriorating credit quality – are also weighing on future growth.
The OECD forecast British growth of 1% in 2019 and 0.9% in 2020. The OECD had forecast in May growth of 1.2% and 1.0%.
If Britain leaves without a deal, UK economy will be 2% lower than otherwise in 2020-2021 even if its exit is relatively smooth with fully operational infrastructure in place, the OECD said. This forecast will only change if Britain leave the EU smoothly with a transition period.
At the same time, Eurozone growth was seen at 1.0% – down from 1.2% in May – this year and 1.0% in 2020 – down from 1.4% in May.
Ireland will suffer the biggest negative shock from a no-deal Brexit outside the UK, the Organisation for Economic Co-operation and Development (OECD) has warned.
The OECD suggests that even with a relatively smooth adjustment, Irish economic growth will be cut by 1.5 per cent in 2020 and 2021, compared with 2 per cent in the UK itself.
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The global economy has become increasingly fragile and uncertain. Global growth is slowing and downside risks continuing to mount, according to the OECD’s latest Interim Economic Outlook.
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