No matter whether we have a full-blown or a light Brexit, the political risk for the continent is that referendums may mushroom across Europe in a tug-of-war between populist forces and the political establishment and elites.
We estimate that this will leave the level of GDP 0.3 per cent lower at the end of 2018 than projected in July. Given these developments, we cut our growth estimate for 2016 to 1.1 per cent. The expansion in both 2017 and 2018 should be about 2.0 per cent, which is above the growth rate of potential.