The Economist Intelligence Unit is a think tank affiliated with the Economist magazine that forecasts economic trends around the world. In the wake of Britain’s vote to leave the European Union — dubbed "Brexit" — it's revising its forecast for Britain’s economy. The results are not pretty:
EIU Brexit Take
— Alex White (@AlexWhite1812) June 29, 2016
1. Brexit has plunged the UK into political, economic and market turmoil. We expect this turmoil to be sustained
2. Financial market volatility will persist, while uncertainty over the future of the UK's relationship with EU will feed into real economy
— Alex White (@AlexWhite1812) June 29, 2016
3. We significantly revised our economic fcast. After growth of 1.5% this year, we expect contraction of 1% in 2017 pic.twitter.com/MuaeHpav6m
— Alex White (@AlexWhite1812) June 29, 2016
4. We expect to see decline in investment of 8% and decline in private consumption of 3% in 2017 with the pound levelling out at $1.24
— Alex White (@AlexWhite1812) June 29, 2016
5. The vote has transformed our fiscal forecasts. Falling tax rev & higher social transfers as unemployment rises pic.twitter.com/DEg0Qu9gpq
— Alex White (@AlexWhite1812) June 29, 2016
6. We now expect the UK's public debt burden to reach 100% of GDP by 2018 pic.twitter.com/Qj3cjsHAcj
— Alex White (@AlexWhite1812) June 29, 2016
7. This hit brings UK's post-crisis recovery to a halt. 2018 real GDP will be almost 4% below pre-referendum forecast (2020 = 6% below)
— Alex White (@AlexWhite1812) June 29, 2016
These are huge numbers, and if these forecasts prove correct it’s going to produce a lot of political turmoil in the UK.
Of course, much depends on what happens over the next two years. It’s possible that British leaders will ultimately decide not to exit the EU. And if Brexit does occur, the terms will be important. If negotiations go well, the UK might be able to secure a deal that isn’t too different from the EU’s current membership terms. If they go poorly, the British could wind up with much worse access to Europe’s common market, with larger damage to the British economy.
