In its annual assessment of the UK’s economy, the Washington based institution said that UK gross domestic product, or national income, would be up to 7.8% lower if Britain faced a “no deal” Brexit and had to shift onto World Trade Organisation rules.
It forecast the economy would be up to 3.9% weaker if the UK sought a free trade deal, such as the so-called Canada-plus being advocated by some Brexiteers.
These projections are in comparison with how the UK would grow if it stayed inside the EU, so do not necessarily imply that the UK would be weaker in the long run than it is today.
Indeed, the projections are in line with many others produced by independent bodies, and are slightly more conservative than those produced by the Government.
The IMF said that the financial services and chemicals industries would be the hardest hit by Brexit, but added that other manufacturers and the agriculture sector would be slightly more prosperous.
However it refrained from predicting whether or not there would be an immediate recession in the event of a hard Brexit, saying that its forecasts were long-term rather than short-term.
Before the referendum the Fund said there could be a recession if there was a disruptive Brexit.
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The Fund said: “Growth is projected to remain around 1.5% going forward, under a baseline scenario that assumes a smooth transition to a broad free trade agreement with the EU.
“The most significant risk to the forecast is the possibility of leaving the EU without an agreement, which would have a large negative impact on growth, especially if it happens in a disorderly manner and without a transition period.
“Beyond Brexit, the UK faces a range of other economic challenges, including persistently lacklustre productivity growth, high public debt, rising age-related spending pressures, and a wide current account deficit.”
The Fund recommended that Britain raise its retirement age even further beyond the current plans of 67 between 2026 and 2028, and urged it to ditch the triple lock on state pension payments.
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