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Brexit Decision Puts Strain on German Economy

Ferdinand Fichtner (), Christoph Grosse Steffen, Michael Hachula, Simon Junker, Simon Kirby, Claus Michelsen, Malte Rieth (), Thore Schlaak and James Warren

DIW Economic Bulletin, 2016, vol. 6, issue 31, 359-362

Abstract: As a result of Britain’s decision to leave the EU, global economic output is likely to grow at a somewhat slower pace than anticipated. The decision will have consequences for the UK and for the euro area in particular; this is also confirmed by simulations produced by the National Institute Global Econometric Model (NiGEM). An expected deterioration of economic relations—especially between the UK and the EU—and the associated increase in uncertainty have led to greater investment restraint. This has been accompanied by a devaluation of the British pound. Both will inhibit the development of the German economy with its strong focus on foreign trade. It will also dampen domestic investment and result in a lower level of consumption due to slightly weaker real wage growth. All in all, the German economy is likely to grow at a slower rate than previously predicted due to the Brexit decision. Growth is forecasted to be 0.1 percentage points lower in 2016 and 0.3 percentage points lower in 2017.

Keywords: Business cycle forecast; economic outlook; Brexit; European Integration (search for similar items in EconPapers)
JEL-codes: E32 E66 F01 (search for similar items in EconPapers)
Date: 2016
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