By Thierry Malleret, economist and founder, Monthly Barometer

By Thierry Malleret, economist and founder, Monthly Barometer

The main economic and market consequences of the Brexit are the following: (1) a much weaker pound (GBP) – a stimulative safety valve that won’t prevent deteriorating economic growth and current account deficit, with a UK recession likely as soon as Q4 of this year; (2) a weaker EUR and a stronger USD; (3) a boost to dollar ($) assets in general; (4) a negative shock for European banks; (5) flattening curves for sovereign bonds – with the exception of peripherals; and (6) the likelihood of a Fed hike in 2016 sharply diminished.



The demand elasticity of travel and tourism varies according to countries, but the industry tends to generally be highly price sensitive. Japan is a good example: the remarkable performance of its tourism and wellness travel industries recently is almost entirely attributable to the yen depreciation that took place over the past few years.

There is no reason the same phenomenon should not apply to the UK. As the pound depreciates against most international currencies, we should expect the British tourism and wellness industries to outperform in the months (and years) ahead. By contrast, the opposite is likely to happen in continental Europe, as EU destinations account for more than two-thirds of British foreign travel, with Spain, France, Italy, Germany and Greece being the most visited countries.

A much more granular analysis would be required to get a sense of the specific impact of a depreciating pound against the euro, but it will be sizeable. In Spain, for example, more than 20 percent of total visitors are British. In Greece last year, two million British tourists contributed €2 billion to an economy in dire need of fiscal receipts.

AuthorThierry Malleret, Economist and Founder, Monthly Barometer