WOOD Flash – EME Macro/Strategy: Brexit – as disorderly as it gets

For the second time, the UK parliament has voted down the deal struck by Prime Minister Theresa May on the “divorce bill” with the EU. Next, parliament is due to vote on whether the UK should opt for a no-deal departure once the current deadline expires on 29 March, or whether an extension should be secured. We expect the UK parliament to aim for a short extension, which the EU is likely to grant, to 30 June 2019. In our view, the chances of a deal between now and then are very small, so a disorderly departure is the most likely outcome, going forward. In the near term, global GDP growth prospects are likely to worsen, even relative to our conservative projections of 0.7% growth for the Eurozone, while our estimate of only 1.2% for the US this year appears more probable, despite the early dovish shift by the Fed. Our forecasts for central Europe are also likely to drop, although a recession there remains unlikely.