Wednesday, 27 July 2016

Brexit's impact on the world economy.

Britain’s vote to leave the European Union looks grim over the global economy.  Although, the world including our nation has accepted the shock waves of Brexit referendum on June 23, 2016.  Various sources states that the UK's vote to leave the European Union increases certain risks to the world, especially on the European economies.

The group of the world's 20 largest economies states that the outcome of last month's June referendum "adds to the uncertainty" for the global economy,  It has urged the UK to remain "a close partner of the EU".  The drop in stocks is a sign of new risks surrounding the global economic position.  Also there may be two or more years of uncertainty as its a new beginning for Britain to implement fresh talks, and to strengthen trade relations with the rest of the world along with bringing in new rules and regulations.

Brexit vote implies a substantial increase in economic, political, and institutional uncertainty, which is not a positive sign, especially for the advanced European economies.  According to the reports there was a dramatic fall in the value of the pound against the dollar and in share prices due to Brexit.  IMF (International Monetary Fund) says that while the effects of Brexit are greatest in the UK, there is not enough information available to make a full assessment of its impact on the global economy.

However, the impact on global growth and inflation may be relatively not very large to push the global economy into recession.  This is because UK accounts for only 3.6% of global imports of merchandize goods and 4.1% of global imports of commercial services.

This referendum is a beginning of a new phase for the British Economy.  Going forward, policy makers in the United Kingdom and the European Union have a key role to play in helping to reduce this uncertainty.  On the other hand economists stress that we have to watch at least for the next six to eight months to access its impact on the global markets.


No comments:

Post a Comment