LONDON, Nov. 1 (Xinhua) -- The European Bank for Reconstruction and Development (EBRD) warned on Thursday that Brexit represents a threat to the economies of one of its core development regions, southeastern Europe.
The international development bank with headquarters in London warned in its new Regional Economic Prospects report that if Britain exited the European Union (EU) with a no-deal separation, it would harm the economies of countries like Romania and Bulgaria.
The EBRD said a no-deal Brexit scenario would severely disrupt cross-border supply chains between Britain and the remaining 27 EU nations in the short term.
Unless other member states increased their contributions to the EU, Brexit would lead to a 10-15 percent decline in structural and accession funds available to countries in central and southeastern Europe, amounting to a reduction of up to 0.4 percentage points of GDP in EU-supported investment, said the report.
The economies of south-eastern European countries would suffer because Britain is a significant export market.
Sergei Guriev, EBRD chief economist told Xinhua: "Some of the countries in that region are exporting more to the UK... We do not expect major disruption of trade but a hard brexit might actually harm the UK economy and that might harm those countries."
"A country like Romania, for example, exports almost 1 percent of GDP to the UK and the question is what happens if the UK economy has a major impact from Brexit. Romania will either have to find other markets or take a hit."
Guriev said it was very hard to speculate what is going to happen in March, when the Article 50 deadline for Britain quitting the EU expires.
"Currently the markets have priced in a scenario where either there is a deal which sustains the status quo in terms of trade or that a deal is not reached but the transition period is expanded for the next couple of years," said Guriev.
"In both cases we do not see major spillover. Uncertainty will increase, which is a major problem."
Brexit might also weaken perceived prospects of EU accession for candidate and potential candidate countries. A slower reform momentum would then weigh on growth.
"Cumulatively, the economic impact of a no-deal Brexit is projected to be largest for economies of southeastern Europe, mainly through disruption to trade linkages encompassing the UK and other advanced economies in Europe, the impact on the EU accession reform momentum and a reduction in the EU structural and cohesion funds," the report said.
The report said the reintroduction of a customs border with the EU would lower the demand for EU exports of finished goods to Britain.
Indirectly, lower exports from Europe's advanced economies to the UK would, in turn, affect demand for imports of intermediate goods from the Bank's regions, the EBRD said.
