Bank of England (BoE) governor Mark Carney has issued fresh warnings over a global growth slowdown, stating that a no-deal Brexit would create an “economic shock” amid rising trade tensions and a slowing economy in China.
Speaking at the Barbican centre in London, Carney argued that “it is in the interests of everyone” that we find a Brexit solution, and urged MPs to solve this Brexit impasse.
According to the governor, the world is in a “delicate equilibrium” as a result of trade tensions, with mounting uncertainty weighing on momentum. He explained that the uncertain economic landscape adds greater importance to the outcome of Brexit, which he said could prove to be an “acid test” for a new global order shaped by the increasing threat of protectionism.
“It is possible that new rules of the road will be developed for a more inclusive and resilient global economy. At the same time, there is a risk that countries turn inwards, undercutting growth and prosperity for all."
Carney highlighted that Brexit has created a “high level of uncertainty”, with companies “holding back on making big decisions”.
“A no-deal would be an economic shock for this country, and this would send a signal globally about re-founding globalisation. That would be unfortunate.”
Furthermore, Carney warned that a downturn in the Chinese economy would further test global resilience, noting that a 3 per cent drop in GDP would have a knock on effect, taking half a percent off of GDP in the UK, US and Eurozone.
“A harder landing would have significantly larger effects, as these channels would likely be accompanied by negative spillovers to global confidence,” he added.
He further cautioned that increasing tariffs by 10 percentage points between the US and its trading partner could knock 2.5 per cent off US output and 1 per cent off global output. Carney has urged policymakers everywhere to address economic risks rather than ignore them.
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