Brexit May Trigger Domino Effects that Reach Indonesia: Analyst
24 June 2016 14:26 WIB
TEMPO.CO, Jakarta-The UK just voted to leave the European Union in a historical referendum that may reshape the whole of Europe. The British exit, or 'Brexit', is also predicted to affect countries outside the continent, particularly in terms of trade.
BCA economist David Sumual said Indonesia will get a minimum effect, as the country has no trade agreements with the UK. Although Indonesia trades with the EU, "the portion is smaller compared to that with the US and China," David said Friday, June 24.
However, there could be unforeseeable effects; "a domino effect, a latter effect," he said.
Market players, he added, are not worried about the effects Brexit has on trade channels. But they are concerned about what it would do to the financial channel. "It will impact guarding currencies like the US dollar and the Japanese yen."
Indonesia might have to look out for small risks as well, he said, like holding bilateral renegotiation with the British if the two countries decide to hold partnerships. Renegotiations, he said, would be necessary since earlier deals with the UK were done through the EU.
David projects the UK economy will decelerate following the EU exit, and the British pound sterling will weaken. "The US dollar and the Japanese yen can use this momentum to gain."
With said predictions, there is a possibility for capital outflows to safer places like tax havens. "Liquidity will tighten and banks would be suspicious; some banks may even collapse."
BAGUS PRASETIYO
