There is a riskier outlook than normal for global economic growth, says the European Central Bank (ECB), partly due to the Brexit vote but more importantly due to the slowdown in trade for the world’s second largest economy China, and other emerging markets.
The ECB bulletin released on Wednesday said that global growth is likely to increase in pace next year but the risks are there nonetheless, as recovery remains lukewarm and unpredictable as uncertainty continues.
The U.S. is expected to lead the recovery and spur domestic and international growth.
“Although the next fiscal year looks promising, helped by strong projections from the leading world economy, the United States, there will be significant downside risks as important emerging economies like China experience a slowdown,” the report said. “The slowdown could be unexpectedly strong, with a number of factors exacerbating the problem such as political uncertainty and macroeconomic fluctuations.”
The ECB presented a similar outlook to the bulletin at its recent meeting this month.
“I doubt anyone will be hugely surprised by the contents of the recent bulletin,” said a spokesperson at CTI China Renaissance in a TV interview. “The pace of growth will obviously fluctuate as investors get used to the new economic landscape.”
The central bank for the euro zone has consistently warned that the full affects of June’s Brexit vote are yet to come. Many analysts predicted much harsher short-term affects than have been observed.
The bulletin continued, “It’s true that many of the instant negative effects of the UK’s decision to leave the European Union that analysts projected have not occurred in a tangible sense. However, we need to wait to see the real economic implications of the vote. We are sure that key factors like investment, business confidence, and uncertainty are all going to be impacted in the longer term.”
