Rising UK trade surplus another risk for the euro-zone

The euro-zone’s trade surplus with the UK is likely to fall as a result of sterling’s depreciation. We think that this will reduce euro-zone GDP growth by about 0.1 percentage points per year in 2017 and 2018, but the effect could be up to 0.2 percentage points. The most likely outcome lies somewhere in the middle, at around 0.1 ppts. In an economy that we think will grow by just 1% next year, this would be significant, making it even more difficult for policymakers to achieve the economic growth and inflation that the region so sorely needs.