IMF: Brexit could cause 'severe' damage to the global economy

The International Monetary Fund (IMF) has warned that a so-called Brexit - Britain leaving the European Union - is a "real possibility" and could cause "severe regional and global damage."

In the fund's latest update of its World Economic Outlook, the institution often called the central banker's central bank said that Brexit "could weigh heavily on confidence and investment, all the while increasing financial market volatility" and argued that the upcoming referendum has already created uncertainty for investors.

Alongside the gloomy predictions about what will happen if the UK votes for Brexit, the IMF also cut forecasts the UK's GDP growth in 2016. Growth is expected at 1.9% this year, down from a forecast of 2.2% in January. That cut came alongside a global growth forecast cut, which saw predictions slashed from 3.4% in January to 3.2% today.

The fund's chief economist Maurice Obstfeld said in a press conference after the WEO's release that the political consensus "that once propelled the European project is fraying" thanks to a "rising tide of inward-looking nationalism." This, he said, makes Brexit a "real possibility."

Here's more from the Fund (emphasis ours):

A British exit from the European Union could pose major challenges for both the United Kingdom and the rest of Europe. Negotiations on postexit arrangements would likely be protracted, resulting in an extended period of heightened uncertainty that could weigh heavily on confidence and investment, all the while increasing financial market volatility. A U.K. exit from Europe's single market would also likely disrupt and reduce mutual trade and financial flows, curtailing key benefits from economic cooperation and integration, such as those resulting from economies of scale and efficient specialization.

Britain's Chancellor George Osborne welcomed the IMF's warning on Brexit, saying in a statement:

While Britain remains one of the fastest growing advanced economies in the world, the IMF's warnings about our exit from the EU are stark. For the first time, we're seeing the direct impact on our economy of the risks of leaving the EU.

The IMF says that these risks are a reason why they have reduced Britain's growth forecast this year.

If Britain leaves the EU, the IMF says there would be a short-term impact on stability and long-term costs to the economy.

Debate over whether or not the UK should leave the European Union is becoming increasingly fervent as the June 23rd vote date approaches, with a whole host of big figures and institutions warning about the potential dangers of Brexit. Last week, the CEO of JP Morgan Jamie Dimon said that Brexit could plunge Europe into the "unknown" and in mid-March, Goldman Sachs warned that Britain leaving the EU could have a devastating impact on British companies.