Impact of BREXIT a global economic concern – ECCB Governor

Governor of the Eastern Caribbean Central Bank (ECCB) Timothy Antoine says he is very concerned about how the global economy will respond to the British withdrawal from the European Union (EU) and how that will impact on Caribbean economies.

On Friday, during a discussion with reporters at the Frenches House conference room in Kingstown, Antoine said the withdrawal (BREXIT) is a seismic shift which would affect {{more}}the region.

“A lot of this now creates a set of uncertainty for what will happen…. Obviously we’re very concerned because the United Kingdom (UK) is an important source market for us.”

According to Antoine, the International Monetary Fund (IMF) and others have projected that the UK would go back into recession as early as next year, adding that over time, BREXIT would possibly affect EU aid grants to the region.

The Central Bank governor noted that it would take at least two years before the UK could make its exit, “but clearly any downturn in the UK economy can have a potential adverse impact on the Caribbean economies, especially with respect to tourism and to some extent, trade and remittances.”

The governor further stated that it is important to recognize the single biggest concern to Central Bank governors, which is the uncertainty of finances.

“We know what could happen, but we’re not sure what will happen, because it depends on how the negotiations take place, how fast they exit, how does the global economy respond. But uncertainty is never a good thing; it undermines confidence, so obviously we’re very concerned about that.”

In terms of the Central Bank’s investment portfolios, the governor said they are well organized and therefore not worried about that.

“We are in high quality assets and in fact, if anything, there would be a flight to quality, which means that we would see some capital appreciation over time,” he added.

The ECCB governor, however, noted that investment income would not rise quickly because interest rates may have to be cut or there may be delays.

He explained that in the current environment there might have to be further quantitative easing to support the UK economy and the global economy to ensure that the risk of going back into recession is minimized.

“So, it is a very, very, serious situation,” he commented.

Additionally, Antoine noted that the UK is driven by discontent that “the fruits of globalization had not been equitably shared.”

He held that BREXIT is premised on fear, fear about losing control, fear about immigration and also lack of fair share, “where people feel globalization does not deliver enough benefits; some people getting, but not enough people benefiting,” he explained.

“So, you’ve seen this rise in economic nationalism… you’ve seen what you’ve seen in the US; you’ve seen what you’ve seen in the UK and other parts of Europe, and I want to make the point – people are questioning these international, regional institutions and whether or not they’re getting value and the cost benefit of that. That’s what the UK just did with the European Union; they said, ‘well, we could save $8.5 billion a year by coming out of the EU’.”

Antoine said that the region has to be mindful of the important contribution regional integration has made and is making to economic development, adding that it would end in disaster if every country tried to run its own central bank.

The governor noted that the people of London voted to stay in the EU by about 70 per cent, because they are benefiting; however, people in outside of London wanted to get out because they are not getting the same benefits.

“So there are some important lessons for us to reflect on as a region with this BREXIT decision,” he added.(AS)