Brexit would create long-term drag on British economy, OECD says

A British vote to leave the European Union would create a long-term drag on the country's economy and dampen global trade growth, the Organization for Economic Cooperation and Development (OECD) said Wednesday.

The Paris-based think tank warned of an overall slowing of growth influenced by weak trade and low investment, saying that the global economy was at danger of getting stuck in negative feedback loops that would ensure low-growth cycles.

If Britain leaves the EU, the country's gross domestic product (GDP) would be 5 per cent lower by 2030 than it would be if it stays, the OECD predicted. Ensuing economic uncertainty would be even stronger if a so-called Brexit caused volatility in financial markets, it added.

Britain's in-out referendum on EU membership takes place on June 23.

Sluggish trade growth and subdued activity in developing markets have contributed to what the OECD called a "low-growth trap," which is bringing down expectations for the global economy.

"The longer the global economy remains in this low-growth trap, the harder it will be for governments to meet fundamental promises," said OECD chief economist Catherine Mann.

"The consequences of policy inaction will be low career prospects for today's youth, who have suffered so much already from the crisis, and lower retirement income for future pensioners," Mann added.

The OECD predicts that global GDP will grow by 3 per cent in 2016 and by 3.3 per cent next year - figures that are unchanged from its interim report on the world economy released in February.

In the United States, the think tank estimated growth to be 1.8 per cent this year and 2.2 per cent in 2017, reflecting to a large degree the trends for highly developed OECD-member countries in general.

The outlook was more pessimistic for the eurozone, where the OECD estimated GDP growth of 1.6 per cent this year and 1.7 per cent in 2017. Financial instability, inflected by the refugee crisis and pushback against austerity policies, has impacted the area's growth outlook, the think tank said.

Last update: Fri, 24/06/2016 - 08:49
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