Reversing Brexit would give ‘significant’ boost to UK: OECD

Secretary-General of the Organisation for Economic Co-operation and Development (OECD), Angel Gurria speaks during a press conference to present the latest Economic Survey of the United Kingdom, in London. (AFP)
Updated 18 October 2017
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Reversing Brexit would give ‘significant’ boost to UK: OECD

LONDON: Reversing Britain’s shock referendum to leave the EU would “significantly” boost the economy, the OECD said on Tuesday, while the government inisted there were no plans to cancel Brexit.
“In case Brexit gets reversed by political decision (change of majority, new referendum, etc) the positive impact on growth would be significant,” the Organization for Economic Co-operation and Development (OECD) said in a new report.
The Treasury responded saying: “We are leaving the EU and there will be no second referendum.”
A spokesman for British Prime Minister Theresa May also reiterated the government’s position that there should not be a second referendum, with Brexit due to take place in March 2019.
The OECD meanwhile left its economic growth forecasts for Britain unchanged at 1.6 percent in 2017 and one percent in 2018.
The OECD, which advises industrialized nations on economic policy, said Britain should seek to maintain close economic ties with the European Union to weather the impact of Brexit.
The Paris-based organization warned that a “disorderly Brexit,” one in which no trading relationship was arranged, would constitute a medium-term shock to Britain’s economic growth prospects.
“Business investment would seize up, and heightened price pressures would choke off private consumption,” the organization said.
“Negotiating the closest possible EU-UK economic relationship would limit the cost of exit.”
Britain voted to leave the EU in a shock referendum in June last year.
Speaking to MPs earlier, Bank of England governor Mark Carney blamed a pick-up in inflation to 3.0 percent on the tumbling value of the pound since the Brexit vote, and said that a transition agreement for Britain’s withdrawal from the EU was in “everyone’s interest.”
The country must now “stay calm and carry on,” said OECD Secretary-General Angel Gurria at the presentation of the report.
Asked whether the UK should pursue a longer transition period for exiting the EU, Gurria said: “Common sense was invented by the British — if you need more time then give it more time.”
The OECD also said that Brexit could exacerbate Britain’s existing productivity problem by increasing uncertainty and reducing business investment.
Reviving labor productivity growth was a challenge “compounded by Brexit,” it said, calculating that leaving the EU could reduce total factory productivity by about three percent after 10 years due to reduced trade.
The OECD recommended investment targeted at increasing productivity, such as “spending on repair and maintenance or soft investment” if growth weakens further ahead of Brexit.
British finance minister Philip Hammond said that weak productivity was one of the issues he would focus on when he presented his annual budget on November 22.


Lebanese PM: new budget start of “a long road” to economic safety

Updated 54 min 21 sec ago
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Lebanese PM: new budget start of “a long road” to economic safety

  • Lebanese PM said the new budget is only the start of the changes for the country
  • Lebanon has one of the biggest debts in the world

BEIRUT: The Lebanese draft state budget for 2019 is the start of a “long road” and shows Lebanon is determined to tackle public sector waste, Prime Minister Saad Al-Hariri said, after his unity cabinet wrapped up marathon talks on the plan.
The budget finalized by the government on Friday cuts the deficit to 7.5% of GDP from 11.5% in 2018. It is seen as a critical test of Lebanon’s will to launch reforms that have been put off for years by a state riddled with corruption and waste.
“The 2019 budget is not the end. This budget is the beginning of a long road that we decided to take in order to lead the Lebanese economy to safety,” Hariri said in a speech at a Ramadan iftar meal on Saturday.
Lebanon’s bloated public sector is its biggest expense, followed by the cost of servicing a public debt equal to some 150% of GDP, one of the world’s heaviest debt burdens.
The government, which groups nearly all of Lebanon’s main political parties, met 19 times to agree on the budget. Hariri said the budget for 2020 would not take that much time “because now we know what we want to do.”
“The 2019 budget is the beginning of the process of what we want to do in 2020, 2021, 2022 and 2023,” he said, according to a transcript of his remarks sent by his office.
The cabinet is due to meet on Monday at the presidential palace to formally seal the process before the budget is referred to parliament.
The budget could help unlock some $11 billion in financing pledged at a Paris donors’ conference last year for infrastructure investment, if it wins the approval of donor countries and institutions.
Hariri said the budget was a message to the Lebanese, financial markets and friendly foreign states that Lebanon was determined to “address the weakness, imbalance and squander in the public sector.”
Measures to rein in the public sector wage bill include a three-year freeze in all types of state hiring and a cap on extra-salary bonuses. State pensions will also be taxed.
A big chunk of the deficit cut stems from tax increases including a 2% import tax and a hike in tax on interest payments.
The government also plans to cut some $660 million from the debt servicing bill by issuing treasury bonds at a 1% interest rate to the Lebanese banking sector.
Fears the budget would lead to cuts to state salaries, pensions or benefits triggered weeks of strikes and protests by public sector workers and military veterans.