Dear Members,
What are the Impacts of Brexit in developing countries?
The only certainty in all this is uncertainty. Uncertainty on the markets and uncertainty over the future of trade relations between the UK and Africa. For example internationally traded African currency, the South African rand, is already having a bumpy ride in the wake of the UK's decision to leave the European Union.
Barclays identifies seven key reasons SSA growth is at risk from Brexit. Take a look below:
1. Brexit could harm global demand for goods, particularly hitting African economies that are focused on the export of raw materials. This would lead to "slower growth and wider current account deficits," Barclays argues.
2. Weaker global demand could also, Barclays says, cause key commodity prices to fall, further undermining the African economy, which relies heavily on exporting minerals, ores, and other commodities. The possible exception would most likely be gold, which has been boosted by market uncertainty since the referendum. Two of the world's 10 biggest gold-producing nations are in sub-Saharan Africa.
3. Tourism will dwindle. A key area of economic prosperity for African nations is tourism, particularly through safaris and other nature tours. The basic argument here is simple — if Brits and other Europeans are suffering through economic hardship, an African holiday will be far less affordable.
4. Fewer African workers will be able to work in developed nations, which will reduce the amount of money sent back to SSA countries. As Barclays puts it, there will be fewer "economic opportunities for African migrants to the UK and Europe, and hence less workers' remittances to home countries."
5. If things get really bad, aid from UK and European governments could start to dry up, robbing SSA countries of vital funding for infrastructure projects and other economically beneficial plans.
6. Brexit is causing heightened uncertainty and, in some respects, increased risk aversion. These factors are likely to increase financing costs and shrink capital inflows into sub-Saharan Africa.
7. Earnings on sub-Saharan investments into Europe and the UK will be lower. That is likely to have the biggest impact on sub-Saharan Africa's most developed nation, South Africa, which has substantial investments in Europe.
What are your opinions on this situation?
Welcome for contributions.
