Barclays warns fate of global economy is a coin toss

Major upcoming events find us at a crossroads...

ESRI, Brexit, FDI, Foreign Direct Investment, corporation tax, Ireland, EU,

A poster is seen at a Brexit conference in the Aviva Stadium in Dublin | Image: Rollingnews.ie

UK financial services powerhouse Barclays has warned that the political risks from the Brexit referendum are leading the global economy towards a fork in the road that could have massively negative long-term implications.

Barclays has found that the stark 'either/or' situation surrounding the Brexit referendum is not the only example of a new, binary economy outlook.

Noting that the outcome of the UK's vote on EU membership this Thursday June 23rd is "impossible to predict", the banking multinational also cited the confusion over whether the US Federal Reserve intends to raise rates or keep them low and concerns that a Chinese economic rebound will fade fast for the rest of 2016 as its key talking points.

Here is Barclays' statement:

The global outlook has become increasingly binary: not only could the outcome of next week’s UK referendum significantly affect developments in Europe and beyond, but this week’s FOMC communication made Fed policy also feel increasingly bi-modal in the face of recent uncertainty about the US labour market.

In a similar vein, this week’s Chinese data suggest that the stimulus-driven growth rebound may already be starting to fade. The political risks from the UK referendum could, thus, usher in a global macro scenario much worse than our current baseline.

Barclays has graphed the probability of a Brexit coming to pass:

The institution has also outlined how it could impact international investment:

Writing on the dangers a 'Leave' result could pose for the Eurozone, Barclays states:

We have raised slightly our baseline macroeconomic scenario as fixed investment is finally picking up: we expect Euro area GDP growth of 1.7% in 2016 and 1.8% in 2017.

However, under a "Leave" scenario, our growth forecast falls significantly to 1.4% in 2016 and 0.4% in 2017, versus 1.7% and 1.8% in a “Remain” outcome, respectively.