20161209-招商证券_香港_-2017_Europe_Economic_Outlook__Cloudy_skies_ahead_in_Europe_as_risks_loom_large_35页_969kb_969kb

2017 Europe Economic Outlook Summary

Core Content

This macro report provides an outlook on the economic and political landscape of Europe for 2017, highlighting a period of increased uncertainty and moderate growth. It also discusses the potential impacts of political developments on the Eurozone and global markets.

Main Points

• Economic Growth: Expected to moderate in 2017, with a projected GDP growth of 1.1% YoY. Consumption remains stable, but investment is likely to be hit by political uncertainty, and net exports will underperform.
• Monetary Policy: Limited room for further monetary easing, with the ECB reducing its monthly QE purchases to €60 billion starting in April 2017. Tapering talks may continue, and the ECB is likely to face pressure to reduce stimulus.
• Fiscal Policy: Coordinated fiscal stimulus is unlikely due to differing national priorities and debt constraints. Countries with fiscal flexibility are unlikely to act, while those most in need are financially constrained.
• Political Risks: 2017 will be a critical year for European unity, marked by a series of elections and referendums that could lead to significant political shifts and market shocks.

Key Countries and Political Developments

Germany

• Angela Merkel is expected to seek a fourth term in the 2017 federal election.
• Domestic backlash against her refugee policy and rising Euroscepticism pose challenges.
• Political uncertainty may lead to policy gridlock and impact reform efforts.

France

• The presidential election cycle is expected to bring uncertainty, with a possible shift to the right.
• Marine Le Pen's potential victory could lead to a major political shift in the EU and Eurozone, possibly resulting in a split.
• Francois Fillon's victory may shift France away from Hollande's leftist policies and boost short-term economic outlook.
• The Socialist Party is fragmented, and Hollande has stepped down, allowing for a more competitive candidate to emerge.
• Fillon's policies are more radical than Juppe's, including cutting public spending and reducing the welfare state, which could appeal to traditional conservatives and address concerns about immigration and national security.

Italy

• The constitutional referendum on December 4th was rejected, leading to Matteo Renzi's resignation.
• This rejection signals a major setback for structural reforms and may result in political gridlock and an early election.
• The Five Star Movement, a populist and anti-establishment party, could gain power in an early election, potentially leading to a referendum on EU/Eurozone membership.
• Italy's banking system remains a significant risk, with high levels of non-performing loans and weak capital levels.

Spain

• The ongoing Catalonia independence movement could flare up again in 2017, especially with rising populist sentiment.
• A referendum on independence is expected in September 2017, adding to political and economic uncertainty.

UK

• Brexit negotiations are expected to begin in early 2017 and will likely span 15-18 months, creating significant market uncertainty.

Market Impacts

• Euro Fluctuations: The EUR is expected to fluctuate significantly in 2017 due to rising political and economic risks.
• Global Market Shocks: European events, particularly elections and referendums, could have significant impacts on global markets.
• Italian Banking Crisis: The rejection of the constitutional reform and Renzi's resignation could lead to a crisis in Italy's banking sector, potentially affecting the broader Eurozone.

Key Forecasts

Indicator	2016E	2017E
GDP	1.4%	1.1%
CPI	0.5%	1.2%
Unemployment	10.1%	9.7%
Current Account / GDP	2.7%	2.6%
Fiscal Balance / GDP	-1.8%	-2.0%
Policy Rate	0.00%	0.00%
EUR/USD	1.08	1.04

Indicator	2016E	2017E
GDP	1.7%	2.2%
CPI	1.3%	2.1%
Unemployment	4.7%	4.8%
Current Account / GDP	-2.8%	-3.0%
Fiscal Balance / GDP	-2.9%	-3.5%
Policy Rate	0.75%	1.25%
Dollar Index	99.2	102.6

Indicator	2016E	2017E
GDP	0.4%	0.7%
CPI	0.3%	0.6%
Unemployment	3.4%	3.2%
Current Account / GDP	3.5%	3.2%
Fiscal Balance / GDP	-6.5%	-6.0%
Policy Rate	0.0%	0.0%
USD/JPY	110.0	117.0

Focus Charts Summary

Focus Chart 1: Major Events in Europe (June 2016–2018)

• June 23, 2016: Brexit referendum
• June 26, 2016: Spain general election
• October 2, 2016: Hungary EU migrant quota referendum
• November 20, 2016: France Republican presidential primary
• December 4, 2016: Italy constitutional referendum
• January 22, 2017: France Democrat presidential primary
• March 15, 2017: Netherlands general election
• Before March 2017: UK activates Brexit process
• April 23, 2017: France presidential election (first round)
• May 7, 2017: France presidential election (run-off)
• August 27–October 22, 2017: Germany federal election
• September 2017: Spain Catalonia independence referendum
• 2017 TBD: Norway parliamentary election
• May 23, 2018: Italy general election (risk of earlier election)

Focus Chart 2: 2017 French Presidential Election Process

• The first round is scheduled for April 23, 2017, with a runoff on May 7 if no candidate secures over 50% of the vote.

Conclusion

The report concludes that 2017 will be a challenging year for Europe, with political uncertainty and structural risks likely to dominate the economic outlook. The Eurozone is expected to face a significant test of unity, and while a full "Italexit" is unlikely in 2017, the possibility of an exit referendum has increased. The report urges a more realistic and coordinated approach to addressing the region's financial and political challenges.