World Economy

Europe’s Political Uncertainty Will Cause Muted Growth

Alex WeberAlex Weber

Political uncertainty is present in almost every country in the world and with the heavy election year in Europe it will be “the dominant factor” in 2017, the chairman of UBS said.

“Political uncertainty is now the name of the game, almost in every country,” Alex Weber, chairman of the Swiss bank UBS told CNBC on Tuesday in Dubai.

“In Britain we’ve seen that over the last summer,” Weber said referring to the country’s vote to leave the European Union. He added that this uncertainty has now spread to Germany, France, the Netherlands and Italy where voters will soon choose new leaders.

First off is the Netherlands but investors seem more concerned over the presidential race in France, where the far-right candidate is expected to win the first round of the election.

“I’m pretty sure Marine Le Pen will be one of these candidates (in the final round) but I don’t think she will be the winner of the race,” Weber told CNBC, adding that he is not very worried about a right-wing shift in French politics.

Amid the political uncertainty, Weber said that Europe should register another year of “muted growth.” According to data released by the European Commission on Monday, Europe is set to grow by 1.8% of gross domestic product this year and the next.

Looking at the United States and its new administration, Weber believes that plans to reduce taxes and boost infrastructure should be good in the medium to long-term but until then one should expect further uncertainty.

“(Tax reduction and infrastructure spending are) going to happen slowly and what we are seeing at the moment is whilst those medium to long-term prospects are good, the tailwinds that we were getting from that are going to materialize at the end of this year. The headwinds that are coming from some of the trade policy are likely to set in earlier, so we could face some period of volatility until actually most of the government is in place, appointments have been confirmed in the hearings,” Weber told CNBC.

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