LONDON (Reuters) – Britain is likely to avoid entering recession after voting to leave the European Union if the Bank of England cuts interest and restarts its quantitative easing program, ratings agency Standard & Poor’s said on Tuesday.
On Monday S&P stripped Britain of its triple-A credit status, downgrading it by two notches and assigning a negative outlook due to the weaker economic outlook and more complicated relations with the EU.
“Brexit is likely to represent a drag of about 1.2 percent of GDP for the UK in 2017,” Jean-Michel Six, S&P’s chief economist for Europe, the Middle East and Africa told a conference call for investors on Tuesday.
“We have a significant slowdown but growth remains positive although obviously in a much more disappointing way. That is because we anticipate a very strong monetary response on the part of the Bank of England, in the form of additional quantitative easing, in the form of a further cut in interest rates,” he added.
The economy could enter recession if house prices fell sharply, rather than stabilize as forecast, he added.
(Reporting by David Milliken, editing by Andy Bruce)