It may not be the next global recession but Brexit cannot be ignored in the region
For many, the events of the morning of June 24 were a rude awakening. A British exit from the European Union an outcome deemed inconceivable only hours before had become a reality.
The pound plunged to its lowest level against the dollar since 1985, global stock markets tumbled, British Prime Minister David Cameron announced his resignation and the political infighting that followed all but reflected a country divided. Some 51.9 per cent voted ‘leave’ to 48.1 per cent who voted ‘remain’.
Meanwhile, Gulf investors, many of which have invested heavily in United Kingdom assets, looked on nervously with no successor to Cameron expected until October and a lack of clarity surrounding the date and terms of Brexit.
In the Gulf Cooperation Council, governments moved quickly to dismiss concerns that their economies would be heavily affected.
Saudi Arabia said it had already made some adjustments to assets denominated in sterling and euros in anticipation of the vote. A move described as a “precautionary stance” by Saudi Arabian Monetary Authority Governor, Ahmed Al Kholifey.
“For the banking sector, we expect that the impact will be limited, because it is less exposed to the two aforementioned currencies’ movements,” he told the Saudi Press Agency.
Elsewhere, the United Arab Emirates said the affect on its financial institutions would be similarly small.
“Due to the limited interconnectedness between the UAE and UK financial systems, there are only a few channels through which uncertainty about future UK and EU relations could affect the UAE financial institutions,” the UAE Central Bank said in a statement.
Others too suggested the region had little reason to worry.
This story is from the July 2016 edition of Gulf Business.
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This story is from the July 2016 edition of Gulf Business.
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