Leaving the EU would hit British living standards, stoke inflation and wipe up to 5.5% off GDP, the International Monetary Fund has warned with less than a week to go until the referendum.

The IMF used its annual report on the British economy to say Brexit would plunge the UK into recession next year and that it could see no economic advantage in leaving the EU.

Previous IMF interventions have drawn an angry response from leave campaigners who have already said the fund should not interfere in the UK’s democratic process. The leave camp has also attacked its record on economic forecasting.

Responding to the latest IMF remarks, Matthew Elliott, chief executive of Vote Leave said: “The IMF has chosen to ignore the positive benefits of leaving the EU and instead focused only on the supposed negatives. If we vote leave, we can create 300,000 jobs by doing trade deals with fast growing economies across the globe. We can stop sending the £350m we pay Brussels every week. That is why it is safer to vote leave.”

The IMF said last month that Brexit could spark a stock market crash and a steep fall in house prices. In Saturday’s report to conclude its annual assessment of Britain’s economy, it added that a leave vote would tie the UK up in trade negotiations that could drag on for years.

The resulting uncertainty would hit spending and financial markets, it said, estimating that even under a relatively benign scenario in which the UK negotiated a trade status similar to that between Norway and the EU, output would fall by 1.5% by 2019, compared with where it would be under continued EU membership.

It modelled a less favourable outlook, in which GDP would fall more steeply. “In the adverse scenario of long negotiations and a default to the trade rules of the World Trade Organisation, GDP plunges by 5.5% by 2019,” it said.

Under that scenario, the UK would fall into recession in 2017, IMF officials said. “The implication would be negative growth in 2017,” said one official briefing reporters in a conference call.

In a baseline scenario in which the UK remains in the EU, growth would be expected to recover in late 2016, as the effects of the referendum waned. But the IMF’s experts also forecast various threats to the UK economy beyond the closely fought vote.

They included Britain’s relatively weak trade position, with a record current account deficit last year. There was also uncertainty about the degree to which the UK’s poor productivity growth would recover and risks associated with the UK’s “buoyant” property market.

The IMF, which has warned of a slowdown in the global economy, urged British policymakers to be on alert for economic shocks and even raised the prospect of a UK interest rate cut.

The report said: “In the event of protracted demand weakness and inflation undershooting, monetary and fiscal policies should be eased, taking into account the benefits and potential costs of such a move.

“Conversely, monetary tightening may need to be initiated earlier than currently envisaged if core inflation or wage growth in excess of productivity growth begins to rise sharply.”

In the near term, the main risk to Britain’s economy was next week’s referendum, the fund’s directors said. “While recognising that this choice is for UK voters to make and that their decisions will reflect both economic and non-economic factors, directors agreed that the net economic effects of leaving the EU would likely be negative and substantial,” they said in a press release accompanying the report.

“In the event of a vote to leave, directors recommended that policies be geared toward supporting stability and reducing uncertainty.”

Brexit would also hit neighbouring EU economies, though the impact would be smaller than in the UK, the IMF said. “Ireland, Malta, Cyprus, Luxembourg, the Netherlands and Belgium would likely be most affected.”

The IMF’s reports on the UK had been scheduled for Friday but publication was delayed after the murder of Labour MP Jo Cox in West Yorkshire on Thursday.

The warnings about a substantial blow to economic growth follow an impassioned plea from the IMF’s managing director Christine Lagarde on Friday for Britain to remain in the EU.

In a speech in Vienna, Lagarde warned of a worrying rise in economic nationalism that threatened the union and urged policymakers to do more to reduce the inequality that made some Europeans “feel left behind”.

The fund’s latest comments on a possible Brexit echoed the Bank of England’s warning on Thursday that leaving the EU would risk pushing the pound sharply lower and sending shockwaves through the global economy.