OECD: Ireland, Luxembourg and Netherlands most exposed to Brexit


Outside the UK, Ireland, Luxembourg and the Netherlands would be most hit by a potential Brexit, according to the OECD’s annual economic outlook released today.

The OECD report also compared the magnitude of the financial market shock that the UK would experience following a Brexit to that felt in Europe during the 2011-2012 euro crisis.

By 2020, the OECD projects the UK’s GDP could be more than 3 per cent lower if it votes for Brexit, while GDP in the European Union could be around 1 per cent lower.

By 2030, the UK’s GDP could be more than 5 per cent lower than if it had not left the EU, the OECD Economic Outlook said.

In the UK, investment and equity risk premia would rise 150bp over the second half of 2016 and 2017, and 100bp in 2018. Credit conditions would also tighten, with the wedge between borrowing and lending for households and corporates rising 100bp over the same period.

Ireland would experience the biggest shock following a Brexit, with investment and equity risk premia rising by 100bp and the interest rate spread by 50bp.

Other countries most highly exposed to the UK economy – Luxembourg, the Netherlands, Norway and Switzerland – would experience between one-third and one-half the financial impact felt by the UK.

“Moderately exposed” countries would suffer between one-quarter and one-third of the market impact the UK experiences. These include Austria, Belgium, Denmark, Germany, Finland, France, Greece, Spain and Sweden, according to the OECD’s analysis.

The Czech Republic, Estonia, Italy, Hungary, Poland, Portugal, the Slovak Republic and Slovenia would experience around one-fifth to one-quarter of the impact.

Brics and other non-OECD economies would suffer from the flow-on effects of economic trouble in Europe, seeing GDP lowered by half a percentage point by 2018.

Each country’s exposure to the UK economy was determined by the UK imports and direct and portfolio assets invested in the UK as a proportion of GDP, as well as the relative intensity of Google searches for Brexit in that country.