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Impact Of Brexit On Asian Economies To be Negligible

BrexitExperts have predicted that both the UK and Europe are likely witness significant fallout in case Britain votes to exit the EU. According to a report released by London-based research firm Capital Economics, the impact of Brexit on Asia would however be minimal.

The report has stated that there would be a drop of up to 0.2 percent in the GDP across Asia. The agency based its analysis on the worst-case scenario developed by the UK think-tank National Institute of Economic and Social Research which said that in the event of Brexit occurring, British imports worldwide would drop by 25 percent in two years.

According to Daniel Martin, senior Asia economist at Capital Economics, UK currently accounts for only 0.7 percent of Asian countries’ GDP. There are only a few economies that have deep economic ties with UK such as Vietnam, Hong Kong and Cambodia.

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In a statement Martin said,

Even a 25 per cent decline in UK imports would knock less than 0.2 per cent off from regional GDP. In addition to merchandise exports, Hong Kong's exports of services to the UK are worth another 2.3 per cent of GDP.

Martin has estimated the impact of Britain exiting EU on Asia to be very limited stating that the region has other factors that bring in higher risks such as the slowdown in the Chinese economy or unstable debt situations.

Examining the impact of Brexit on China in a separate note, Capital Economics said that the impact would be subdued since China’s exports to UK forms only 0.5 percent of China’s GDP.

According to the firm’s analysts Chang Liu and Julian Evans-Pritchard, China is equipped to handle any occurrence of market selloffs. They attributed the low impact due to the fact that China has a closed capital account system which restricts the exposure of the country’s markets to global events. The paper also observed that the country had enough renminbi reserves to handle any pressure on its currency.

Eric Delomier, an investment specialist at Capital Group's Singapore office said that there might trading implications since China is one of the largest investors into the UK and part of the appeal till now has been its single market access.

Regardless, most Asian countries have made it clear that they prefer Britain to remain within the EU. Delomier stated that there would definitely be geopolitical and economic consequences for Asian economies as well should the Brexit go through.


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