Jamaica and the Impact of Brexit The recent decision by Britain to leave the European Union is already affecting the economies of almost every country worldwide. The British economy is the ninth largest in the world (2nd largest in European Union to Germany) and makes up 4% of world GDP. The pound took a pounding and fell to a 31-year low of $1.3151. France overtookMost importantly for Jamaica, is the close ties that we have to our former colonial masters, as well as the close ties we have to those whom they have close ties (first and foremost is the United States). It does not stop there. Thursday's vote has probably triggered a worldwide recession. The pound is sliding and banking stocks took a plunge, bringing other stocks with them.
This is Monday, and trillions have been knocked off the stock market worldwide. To show the extent of this damage, one company, ITV, has since seen £250bn knocked off its value. In fact, we witnessed world history being made twice: the biggest one day and two day fall in the history of the world stock market.
To show the impact of the Brexit vote on the British economy, take a look below at early trading from this morning:
What does this mean for Jamaica? Well, stocks could easily rally today or in a few days, but the damage has already been done and is expected to be far reaching. Jamaicans in Britain who are already struggling, will have less remittances to send back home. Some will lose their jobs, price increases will mean less disposable income for those employed. With the fall in the value of the pound, American exports to Britain will become more expensive. This will affect the US economy, the major source of remittances to Jamaica, and the country on whose economy Jamaicans so much depend.The Jamaica Observer's business reporter puts Jamaica's position into more perspective:From The Jamaica ObserverFollowing the United Kingdom’s vote to leave the European Union, financial analysts and the Minister of Foreign Affairs and Trade Senator Kamina Johnson Smith have voiced concerns about the impact it will have on the Jamaican economy.On Thursday, Britain, in a referendum popularly referred to as ‘Brexit,’ voted to break out of the European Union, striking a blow against the bloc and spreading panic through world markets as the pound sterling collapsed to a 31-year low. Voters decided 52 per cent to 48 per cent in favour of quitting the bloc.Europe has been facing an acute refugee crisis, which has seen thousands of people from war-torn countries in the Middle East and North Africa flee to seek refuge and a better life in European countries. The crisis has threatened to destabilise to already fragile economies, bringing on anti-immigration sentiments across the continent and calls for a suspension of the Schengen Agreement — the EU treaty that guarantees free movement across Europe.But the British decision to leave the European Union could pose a significant threat to the Jamaican immigrant community, according to financial analyst Keith Collister, and may impact Jamaica’s economy through remittances and tourism.
“The pound is likely to remain extremely volatile. After an overnight fall of 11 per cent and partial recovery, the fall is likely to resume, possibly reaching more than 20 per cent, in line with the projections of global investor, George Soros. As part of the US-dollar zone, the whole Caribbean will immediately become much less competitive to British tourists,” Collister stated in an emailed response toJamaica Observer queries.“Additionally, Jamaicans living in the UK will have much less money, in US dollar terms, to send to their relatives here. On top of this, Brexit may tip the UK into a recession, as well as raising the risks of a global downturn, with negative feedback effects to the UK and Jamaica, further accentuating the decline in tourism and remittances,” he continued.On Friday the Jamaican dollar exchange rate for the pound was $176.77 to one UK pound — a decline of $7.91 from the previous day.But Jamaica can rely on continued strong relations with the UK, British high commissioner to Jamaica, David Fitton told the Sunday Finance. “It’s still early days, so we can’t say much on the detail yet. The UK/Jamaica partnership will remain just as strong and will flourish,” he said.The UK decision to leave the EU could also have a long-term effect on the negotiation of new agreements with Jamaica among other Caricom countries to replace the ACP-EU Cotonou Partnership Agreement and the CARIFORUM-EU Partnership Agreement.“While it is likely trade agreements will be reached, the more obvious negative effect may be a further tightening of controls on immigration, a key issue over which the campaign was fought, with possible negative implications for Jamaicans,” Collister said.Johnson Smith, in a release to the public, stated that the vote to leave the EU means the UK will eventually cease to be part of the relevant arrangements that govern Jamaica-EU relations, but trusts that “renewed efforts will be made to strengthen and expand the Jamaica-UK partnership in all areas, not least in relation to trade, investment and development cooperation”.“We are certainly committed to working towards these goals. At the same time, we reaffirm our commitment to the Jamaican Diaspora in the UK and express the hope that they and their families will realise their aspirations and contribute to the prospects for a revitalised relationship between Jamaica and the UK,” the senator said. “It is our hope that the UK will unite in dealing with what is undoubtedly a new and historic phase in its history.”For the period 2008-2013, the European Development Fund (EDF), under its 10th payout, provided approximately €1 billion for the implementation of national and regional programmes in the Caribbean. The main projects funded were Economic Integration and Trade of the Organisation of Eastern Caribbean States, Caribbean Single Market Economy integration programme, the EPA implementation programme, the Regional Private Sector Development Programme and the bi-national Haiti/Dominican Republic programme.Over the period 2014-2020 the total indicative 11th EDF allocation to the Caribbean Regional Programme is €346 million. The programme is based on the assessment of major regional challenges — mainly inherent vulnerability to natural disasters and the increase in violence and crime which continues to impose high social and economic costs and needs particular attention. It represented a substantial increase in respect the allocation of the 10th EDF (€165 million).Source.