Country Economic Forecasts > Eurozone

While the UK referendum result may have profound political implications for the EU, we think that the predictions of some that it will have a major economic effect on the Eurozone are exaggerated. Despite the large initial negative response from European markets to the news, the equity market reaction has been no worse than that seen during the early-2016 China-related sell off. And while peripheral government bond spreads initially widened, they have since narrowed and yields remain very low. For now at least, it seems unlikely that Brexit will trigger a major economic shock via the financial channel.So while we have downgraded our GDP growth forecasts, reflecting lower export, investment and household spending, the revisions are quite small. We now see GDP growth slowing from 1.7% this year to 1.5% a year in 2017-19. The forecasts for next year and 2018 are just 0.2% points lower than last month while 2019 is down 0.1% point, and our 2017 forecast is well above the post-Brexit consensus of just 1% growth.