Brexit Current Affairs - 2019
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A study by the global investment banking, securities and investment management firm, Goldman Sachs has stated that Brexit has cost Britain nearly 2.5% of GDP.
Findings of the Study
- Britain’s economy has lost nearly 2.5 per cent of GDP relative to its growth path prior to the mid-2016 referendum on exiting the European Union (EU) and has lagged other advanced economies as uncertainty dents investment.
- Policy makers in the UK are still struggling to chalk out the Brexit modalities. The resulting uncertainty over the future political and economic relations with the EU has resulted in real costs for the UK economy and has a spillover effect on other economies.
- Brexit uncertainty has been a major driver of economic output losses as they are concentrated in investment.
- Goldman Sachs predicts that the Brexit cost stood at around 600 million pounds ($785 million) per week since the referendum.
- Further, in a no-deal Brexit scenario it predicts a 15 per cent chance of, Britain witnessing output losses with a ”substantial” global confidence shock marked by sharp sterling depreciation.
The study notes that the Brexit will have spillover effects and European countries would be most exposed to this scenario and estimates an output loss of around 1 per cent of real GDP.
The Organisation for Economic Co-operation and Development (OECD) has reduced the world economic growth forecasts for the year 2019.
Economic Forecasts of OECD
- The report notes that trade tensions and political uncertainty, including Brexit and erosion of business and consumer confidence are weighing on the world’s economy thereby contributing to the slowdown.
- OECD has cut its 2019 forecast for global economic growth to 3.3% for the current year, down from 3.5% it predicted earlier.
- OECD growth forecasts for Germany sank to 0.7% from 1.4%, while Italy’s fell from 0.9% growth into a recession at -0.2%.
- OECD forecasts noted that the sharp downturn in the two countries reflected “their relatively high exposures to the global trade slowdown.
- The forecasts for France have slipped from 1.5% to 1.3%.
- Britain’s growth forecast has been chopped from 1.4% to 0.8%. For the first time, the growth rates have fallen below 1% since 2009 following the global economic crisis.
- The 19-nation eurozone was particularly hard hit, with predicted growth dropping from 1.8 per cent to one per cent which was contributed to policy uncertainty including those over Brexit.
- The report notes that a sharper slowdown in China would have significant adverse consequences for global growth and trade.
OECD’s forecasts are more downbeat than the IMF’s for many economies, particularly the euro region and the U.K.