July 17, 2019 / 10:30 PM / a month ago

UK's fiscal watchdog to warn of recession in 2020 in case of 'no-deal' Brexit: The Times

FILE PHOTO: People walk through the Canary Wharf financial district of London, Britain, December 7, 2018. REUTERS/Simon Dawson/File Photo

(Reuters) - Britain’s fiscal watchdog is expected to say on Thursday that Britain’s economy will fall into a recession next year and that its economy will be 3% smaller in the event of a “no-deal” Brexit, The Times newspaper reported.

The Office for Budget Responsibility's (OBR) five-year forecast predicts that growth will contract in 2020 as the UK economy officially enters into a recession, the newspaper said bit.ly/2XOKkqe on Wednesday.

The OBR on Thursday will lay out and analyze risks to the medium-term outlook for Britain’s public finances, and has said it will model a fiscal “stress test” on the economy.

It has said that it will use the International Monetary Fund’s modeling of a no-deal Brexit in its analysis.

In April, the IMF warned that Britain would suffer economic damage equivalent to the loss of at least 2-3 years of normal growth between now and the end of 2021 if it leaves the European Union without an exit deal.

The IMF said that even in a relatively orderly no-deal Brexit scenario — with no delays at borders and minimal financial market turmoil — the economy would grow 3.5% less by the end of 2021 than it would under a smoother Brexit.

Reporting by Philip George in Bengaluru and Alistair Smout in London, additional reporting by David Milliken in London; editing by Diane Craft

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