The UK’s exit from the European Union could cause “severe regional and global damage”, the International Monetary Fund has warned in its latest outlook.
A so-called “Brexit” would disrupt established trading relationships and cause “major challenges” for both the UK and the rest of Europe, it said.
The IMF said the referendum had already created uncertainty for investors and a vote to exit would only heighten this.
Vote Leave said the IMF had been “consistently wrong” in past forecasts.
The IMF also cut its UK growth forecast. It now expects 1.9% growth in the UK this year, compared with its January estimate of 2.2%. For next year, it expects 2.2% growth, unchanged from its earlier forecast.
If the referendum were to decide in favour of leaving the EU the IMF would expect negotiations on post-exit arrangements to be protracted, which it warned “could weigh heavily on confidence and investment, all the while increasing financial market volatility”.
It also believes a UK exit from the EU would “disrupt and reduce mutual trade and financial flows” and restrict benefits from economic co-operation and integration, such as those resulting from economies of scale.
However, the Fund said that domestic demand, boosted by lower energy prices and a buoyant property market, would help to offset the impact on UK growth ahead of the EU referendum.