A British exit from the European Union could pose major challenges for both the United Kingdom and the rest of Europe, said the International Monetary Fund (IMF) in its latest World Economic Outlook.
The IMF said negotiations on post-exit arrangements would likely be protracted, resulting in “an extended period of heightened uncertainty that could weigh heavily on confidence and investment, all the while increasing financial market volatility.”
It said a UK exit from Europe’s single market would also “likely disrupt and reduce mutual trade and financial flows, curtailing key benefits from economic cooperation and integration, such as those resulting from economies of scale and efficient specialization.”
Further, Maurice Obstfeld, the IMF’s Economic Counsellor and Director of Research warned that instability in a number of countries, notably Syria, had caused a “humanitarian disaster” which has challenged the European Union’s capacity to preserve open internal borders.
“Coupled with other economic pressures, the result in Europe has been a rising tide of inward-looking nationalism,” said Obstfeld.
“One manifestation is the real possibility that the United Kingdom exits the European Union, damaging a wide range of trade and investment relationships.
“At the same time, across Europe, the political consensus that once propelled the European project is fraying.
“In other advanced countries as in Europe, including in the United States, a backlash against cross-border economic integration threatens to halt or even reverse the postwar trend of ever more open trade.”