The UK voted to part ways with the EU in June. Since then Brexit uncertainty has left the UK’s market in disarray as the pound sterling’s fallen 18% since the referendum. While what happens in the UK might seem like ‘just something across the pond,’ the coming months of Brexit negotiations could impact your money, investments and global trade.
The Bank for International Settlement (BIS) and the International Monetary Fund (IMF) have identified banks that are ‘systemically important’ to the world economy. Under those same principles, the United Kingdom is a systemically important country for financial markets. What happens in the UK matters worldwide.
Why the UK Matters
The IMF’s World Economic Outlook report noted, ‘the Brexit vote implies a substantial increase in economic, political, and institutional uncertainty, which is projected to have negative macroeconomic consequences.’ The organization has since reduced its global forecast for 2017 by 0.1 percentage point, down to 3.4 percent. The IMF also reduced Britain’s 2016 GDP forecast to 1.9%.
The UK is the second largest economy in the EU system (for now anyways). According to the World Bank’s GDP index for 2015 the UK holds the fifth largest economy in the world. To see a systemically important world economy make such a move will have real repercussions.
This post was published at Wall Street Examiner by Craig Wilson ‘ October 27, 2016.