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Analisi 15.07.2016

Investment Outlook Q3 2016

Investment Outlook Q3 2016

Global growth outlook clouded by rising political uncertainties


The world growth outlook should remain modest in the second half of the year, despite the surge in risk after the UK’s referendum on its EU membership.

Concern about a renewed US slowdown in early 2016 aggravated pressures in both Europe and Asia. This raised fresh concerns about the availability and effectiveness of future policy measures by central banks, as well as the political capability of fi scal agents in governments around the world.

However, it was, once again, policymakers whose actions helped allay concerns, with the US Federal Reserve pausing its tightening cycle while the European Central Bank (ECB) expanded its purchases and announced its ‘credit easing’ programme in March. China’s authorities also joined the fray with more traditional fi scal and monetary measures, and even the G20 weighed in, restraining members from using currency weaknesses to help their domestic economies.

Although central banks demonstrated their readiness to support growth momentum and carry out economic repairs where possible in H1 2016, the unexpected ‘leave’ vote in the UK now puts their inability to drive structural reform in the spotlight – a task left to reluctant politicians in Europe and, increasingly, around the world.

Politicians on the Continent will now have to take the lead in reshaping the European project. The UK’s vote marks the start of a long period of uncertainty in Europe, heightening risks of the EU fragmenting. The lack of momentum on reforms since the eurozone crisis broke out, combined with the catalyst of the UK’s leave vote, forms the key threat to the fragile global growth.

The direct economic damage from the UK’s leave vote should weigh most heavily on the UK economy, while having only a moderate impact on that of the eurozone. Our expectations on world growth have barely changed in the aftermath of the vote, as we see limited impact on a steady recovery in the US and stability that has re-established itself in emerging economies.

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