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  • The European Commission (EC) slashed their economic forecasts highlighting the risks associated with a slowing Chinese economy and the uncertainty created by Brexit. Most notably, the EC predict GDP growth for the European economy in 2019 of 1.3% (close to estimated par growth and significantly down from their November forecast of 1.9%). On a similar basis, the expectation for German GDP for ’19 was reduced to 1.1% (from 1.8%) and more worryingly for the Italian populist government, estimated GDP for Italy in 2019 was reduced to 0.2% (from 1.2%). We expect that the ECB at their next meeting will acknowledge this new macro-economic reality with a Draghi inspired dovish message.
  • The Bank of England highlighted the impact of the Brexit process on the economy. UK politicians are making it especially difficult for Mark Carney and his colleagues in applying appropriate monetary policy. With little confidence they forecast GDP growth of 1.2% in 2019 (down from 1.7% in November).    
  • Theresa May went on tour last week visiting Belfast, Brussels and Dublin with the latest demands from the House of Commons. Unsurprisingly nothing of note was achieved – unless May’s strategic goal was to waste time with the March 29 deadline fast approaching. There is increasing speculation that the deadline will be extended for three months thereby allowing both sides to prepare for a no deal scenario.
  • Even in the most benign Brexit scenario it is widely recognized that it will have a net negative impact on the Irish economy. We expect, at the very minimum, that the Irish government will be allowed some flexibility with regards their budget deficit targets and there is a possibility that the EC will provide direct financial assistance. In the short term, Irish politicians should avail of the opportunity to bask in the glory of an unemployment rate of 5.3% (see chart) – this prospect may not exist in six months’ time.