Bank of England governor Mark Carney has urged MPs to solve the Brexit impasse in a speech warning of growing threats to the global economy. He said a no-deal Brexit would create an economic shock at a time when China's economy is slowing and trade tensions are rising.
It is in the interests of everyone, arguably everywhere that a Brexit solution is found, he said. The BoE already cut its UK growth forecasts, partly due to Brexit issues.
In a speech at the Barbican, in London, Mr. Carney said trade tensions and Brexit are manifestations of fundamental pressures to reorder globalization, and that quitting the bloc could undermine global expansion.
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.
Brexit has created a high level of uncertainty, he said, and companies are holding back on making big decisions.
As such, he said it was vital for the UK economy to secure a good withdrawal deal and a smooth transition. A no-deal would be an economic shock for this country, and this would send a signal globally about re-founding globalization. That would be unfortunate.
At a global level, Mr. Carney said that growth had been slowing in all regions since 2016 after peaking at 4%. He said that growth was likely to stabilize, but warned that a further slowdown in China, rising trade tensions and complacency could get in the way.
The Bank of England estimates that a 3% drop in Chinese GDP would knock 1% off global activity, including half a per cent off each of UK, US and euro area GDP, he said.
He added that a larger increase in tariffs of 10 percentage points between the US and all of its trading partners could take 2.5% per cent off US output and 1% off global output.
The governor urged policymakers everywhere to address economic risks rather than ignore them. Although the economic and financial imbalances in the global economy do not yet appear to contain the seeds of their own demise, global momentum is softening.
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