Home / Business / 21 Leading Economic Institutions Slash UK GDP Forecasts

FocusEconomics_Brexit_Forecast2016_2017 (1)Barcelona, Spain – 28 June 2016 – UK GDP growth is expected to decelerate markedly both this year and next
amid a backdrop of low business sentiment, a significantly-weaker currency and a deteriorated outlook for the labor market, according to FocusEconomics’ latest survey among 21 leading institutions.
Economic analysts that participated in the latest FocusEconomics survey on the UK economy have slashed their forecasts for 2016 and now foresee 1.4% growth—a cut of down 0.5% from the pre-Brexit estimate last month. Analysts have also revised
down their forecasts for 2017 as the fallout from the Brexit will continue to be felt. The FocusEconomics Consensus expects the UK economy to grow 0.3% in 2017, a 1.8% downward revision from the 2.1% expansion foreseen last month.
The risks of an unprecedented exit from the EU are being widely discussed and there is consensus among
analysts that the separation process is associated with high economic uncertainty.
Among the most pessimistic analysts are KBC and Credit Suisse, forecasting a contraction of 1.5% and 0.5% respectively for
2017. Frontier Strategy Group also said it had lowered its GDP growth forecast for 2017 to a contraction of
0.5% from the 2.2% expansion expected the previous month. Mark McNamee, Senior Analyst at Frontier
Strategy Group comments:
“We have revised our outlook for the pound, inflation, GDP, as well as all GDP components. Our revisions
assume continued political volatility, particularly driven by a coming Scottish referendum, as well as
interest rate cuts by the Bank of England and major drop in investment amid such continued uncertainty
in the market.”
Mikael Olai Milhøj, Senior Analyst at Danske Bank, who expects the UK economy to grow 1.0% this year and
to contract 0.4% in 2017, analyzes the consequences of the Brexit on the labor market:
“We expect the UK to fall into recession in the second half of the year which would likely cause
unemployment to rise with a lag. UK is likely to be hit by falling investments due to higher uncertainty
about the future economic environment for British firms. It is also likely that private consumption growth
will slow. The longer-term consequences depend on the future UK/EU relationship and are more difficult
to estimate. In the very short term, we expect GBP volatility to remain high. We expect EUR/GBP to
stabilise in 0.85-0.90 range. Medium and long-term outlook is very uncertain. Flows, growth and relative
monetary policy point towards a weaker GBP.”
FocusEconomicsGDP_UK_AfterBrexit (1)
Some economic institutions are still in the process of revising UK’s GDP forecasts, but the downtrend trend
is clear. Simon Kirby, Head of Forecasting at NIESR, suggests an impact on GDP in the range of -2.2% to -6.3% in the long-run:
“Heightened uncertainty and risk aversion will likely persist in the UK and Europe in the interim, and
probably beyond. It is currently unclear whether the government will aim to join the EEA or move to a
WTO status. These have rather different implications for the long-run negative effect on the UK economy.”
It may be years before the full impact can be analyzed, but market volatility is very likely to remain high going
forward and a prolonged political vacuum will only add to the uncertainty, all of which will weigh on the
currency and the investment outlook.

About FocusEconomics:

is a leading provider of economic analysis and forecasts for 127 countries in Asia, Europe, Africa and the Americas, as well as 33 key commodities. The company is supported
by an extensive global network of analysts from the world’s most renowned international investment banks
and top national financial institutions. Each month, we survey several hundred carefully selected economic
experts from the leading banks, think tanks and consultancies to obtain their projections for the main
economic indicators and commodities prices. The forecasts are corroborated and analyzed by our in-house
team of economists and complemented with brief commentaries on the latest economic trends.
Further information is available at www.focus-economics.com.
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About the author: admin


Oxford based journalist and consultant, who writes about business, especially the global energy business including exploration. Also editor Oxfordprospect.co.uk. Writes about a variety of topics including production, power generation including renewables, innovation, investment, markets, technology, regulation, leadership, policy making and management.


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