Brexit—UK’s decision to leave the European Union—is roiling the global markets. The surprising referendum result has brought another uncertainty to the global economy, with fears of a weaker UK creating panic among financial investors.
The peso and the local stock market tumbled following the results of Friday’s UK referendum. The British pound sank to its lowest in more than 30 years, while global stock markets plunged.
Britain’s vote to exit from the 28-nation bloc already erased almost $4 trillion off the value of global equities, as investors sold what they consider riskier assets on worries of trade disruptions and political paralysis amid the fragile global economic recovery.
UK trade agreements and other economic arrangements with the EU will likely be decoupled, with nations negotiating separate deals to further their relations with Britain. Its secession from the 28-nation EU economic bloc spells uncertainty and will affect those relying heavily on British trade.
Credit rating agencies, this early, have sensed UK’s dilemma. Brexit will certainly cause disruption to world trade and it will take time for the UK to realign its economy.
The Brexit fallout, meanwhile, will have little effect on Philippine trade and on migrant Filipino workers in the UK. Still, the contagion in the global financial markets will weigh on the peso and the local stock market.
The peso dropped below 47 against the US dollar Monday after investors sought safer havens amid the Brexit uncertainty. The Bangko Sentral ng Pilipinas expects the global financial turmoil to persist at least in the short-term period, while assuring the Philippines has the economic fundamentals to weather the storm.
It may be too early to talk about the possibility of a global recession in the aftermath of the Brexit. The incoming administration of President-elect Rodrigo Duterte, however, should not be complacent. The new government must keep the country’s economic fundamentals solid to minimize the shocks coming from other continents.