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PUBLISHED: Jun 27, 2016 9:33am

Goldman Sachs: Britain likely to slip into recession after Brexit

A bar in Dublin has specially made a Brexit beer for the results of the British EU Referendum called 'Big Mistake' in Ireland, June 26, 2016. REUTERS/Clodagh Kilcoyne


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NEW YORK, 27 June 2016: 

Britain is likely to enter a recession within the year as a result of last week’s vote to leave the EU, a decision that will stunt global economic growth as well, Goldman Sachs’ top economists said yesterday.

“We now expect the (British) economy to enter a mild recession by early 2017,” Goldman economist Jan Hatzius and Sven Jari Stehn wrote in a note for clients.

They expect the victorious “leave” outcome in the June 23 referendum to chop a cumulative 2.75% off UK gross domestic product in the next 18 months.

They also expect knock-on effects in the US and European economies.

Goldman now expects eurozone GDP over the next two years to average 1.25% versus 1.5% before the Brexit vote.

For the US economy, the bank now expects GDP growth in the second half of 2016 to come in at 2% versus a forecast of 2.25% previously.

Goldman sees three principle risks for as a result of the vote:

  • terms of trade are likely to deteriorate;
  • companies are likely to scale back investment due to the uncertainty created by the outcome; and
  • financial conditions will tighten due to exchange rate fluctuations and weakness in risk assets like stocks and junk bonds.



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