Moody's cuts UK and Eurozone growth forecast

Brexit raises uncertainty for consumer, investor confidence, ratings agency says.

NEW YORK (AA) - The growth forecast of the U.K. and the euro area have been lowered for this year and the next due to the Brexit, Moody's Investors Service said Friday.

The ratings agency said it cut expectations for the U.K. to 1.5 percent for 2016, from 1.8 percent; and to 1.2 percent for 2017, from 2.1 percent. 

"Lower growth is expected to be primarily driven by a precipitous fall in investment," Moody's said in its statement and warned that forecast could be revised if asset and home prices fall and consumption declines. 

Moody's also stressed that the U.K.'s vote to leave the EU, known as the so-called Brexit, heightened uncertainty for the country, especially consumer and investor confidence, but added that it expects "limited spillovers to EU growth overall".

Nevertheless, the agency cut growth expectations of the euro area slightly, to 1.5 percent for 2016, from 1.7 percent; and to 1.3 percent for 2017, from 1.6 percent. 

"The direct trade and real economy linkages between the U.K. and the EU are asymmetric ... while 48 percent of the U.K. exports go to the EU, only 7 percent of EU exports are destined for the U.K.," the agency said in explaining the revisions.


 

UK Eurozone Growth

 


 

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