Published:  01:01 AM, 10 January 2019

World Bank warns of wider no-deal Brexit fallout

World Bank warns of wider no-deal Brexit fallout A no-deal Brexit would send shockwaves throughout Europe and further east into Belarus and Ukraine and south to North Africa and Turkey. -Getty

A no-deal Brexit will have a negative economic impact from Moldova to Morocco, as the shockwaves sweep eastwards across Europe and through trade links to North Africa, the World Bank has warned. Unlike previous reports which focused on the UK and the 27 members of the European Union, the Washington-based organisation said nations from Belarus, Ukraine and Moldova in the east, and around the Mediterranean from Turkey and Egypt to Morocco would also suffer should Britain and the EU fail to agree a deal.

Franziska Ohnsorge, the report's author, said: "Brexit without a deal is a risk to the UK and to Europe and any region that trades heavily with them. It means that countries in eastern Europe like Moldova and as far away as Georgia and those in North Africa will be affected."

The warning came as the bank forecast a drop in global economic growth in 2019 and 2020, largely in response to slowing growth across the developed world. It said that global average growth would fall to 2.9% this year and 2.8% in 2020, after slipping to 3% in 2018, down from a forecast of 3.1% made in June last year.

While the slowdown remained relatively mild, the bank warned in its latest health check of the global economy that there were "darkening prospects", not just from a no-deal Brexit, but from a more aggressive trade war between the US and China and growing political tensions.

 "At the beginning of 2018 the global economy was firing on all cylinders, but it lost speed during the year and the ride could get even bumpier in the year ahead," said world Bank chief executive Kristalina Georgieva.

"As economic and financial headwinds intensify for emerging and developing countries, the world's progress in reducing extreme poverty could be jeopardised. To keep the momentum, countries need to invest in people, foster inclusive growth, and build resilient societies." In its last forecast, the bank urged the US president, Donald Trump, and China's leader Xi Jinping to resolve their trade disputes or risk an economic crash equivalent to the 2008 financial crisis.

The bank said that due to lingering uncertainties about the trade war and volatile commodity markets, with oil prices plummeting since last summer, this year would be the first since 2008 when large parts of the developing world failed to generate the income needed to reduce poverty rates. In 2018 large parts of sub-Saharan Africa suffered a rise in poverty, jeopardising the bank's plan to eliminate extreme poverty by 2030.

There were hopes at the bank, which was handed a $13bn (£10.2bn) boost to its lending facility last year, that the situation would improve again in 2019. But every developing world region except east and south Asia would see poverty levels stagnate at best this year, the bank said.

Georgieva said the fall in global growth could largely be blamed on slowdowns in the US, Europe and Japan. Growth among advanced economies is forecast to drop to 2% this year as higher interest rates and trade worries weigh on business and consumer confidence.


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