Middle East may not feel pounding from Brexit

Dubai - Britain leaving EU would add to uncertainty at a time of global economic weakness

The UK economy is expected to be hit hard if it decides to leave the European Union bloc after two days but Middle Eastern and Gulf countries might not feel the heat, according to industry experts.
Britain will vote in a referendum tomorrow on whether to remain in the EU. A vote to leave the 28-member bloc, dubbed Brexit, could tip Europe back into recession and throw global financial markets into turmoil.
"Economically speaking, I can foresee tough times ahead for UK if it decides to leave EU. But I don't see any major economic or financial hiccups for GCC economies," Shan Saeed, chief economist at Malaysia-based IQI Group, told Khaleej Times.
The IMF in a recent statement has said that a British exit from the European Union would add to uncertainty at a time of global economic weakness.
"Britain has always been seen as a part of the European Union and an exit of the country from this important geopolitical economic bloc will have significant impact on the perception levels of regional business. I strongly feel that Britain should remain in the EU for the beneficial future of the other EU countries and Britain itself as well as the overall world economy," Dr Azad Moopen, managing director and founder chairman of Aster DM Healthcare, said. People in the Middle East hope the UK would remain in the bloc as they have a lot of investment in the country, especially in real estate.
Dr Moopen added: "There could be a negative impact to a limited extent even in the Middle East, which has got significant socio-economic connections with Europe." London has been a popular investment destination for quite a few countries, half of the investments in the UK come from the EU - but a great chunk of investment trickles down from China, the US and the Middle East.
"Middle East investors have continued to buy real estate in the UK despite fears about the country's future in the EU. The majority of the Middle East property investors prefer the UK to remain in the EU. Half of the investors have also expressed concern that London's decision to leave the EU will have a negative impact on their investment strategies," said London-based legal expert Sarosh Zaiwalla.
Shan Saeed said there are a number of good reasons why GCC and the UAE can weather the financial storm after June 23 if the UK decides to leave the bloc. Explaining, he said GCC economies are very different and oil-driven. The UAE economy is very well-diversified with strong balance sheet of the government.
Banks are well-capitalised in the region, he said, adding that capital movement will continue as part of the strong financial markets in the GCC.
"The trade and defence agreements with the UK will stay in place and cannot be revoked. The UK will continue to strengthen ties with the GCC region," he said.
"FDI and portfolio investment are still coming into the GCC region amounting to $77-$100 billion in 2016. It also gives an opportunity to GCC countries to broaden their investment to other regions like India, Pakistan, China, Malaysia, South Africa and Brazil to boost trade cooperation," he explained.
There is no second opinion that the UK will feel the heat of leaving the EU.
The IMF issued a fresh warning that a British vote to leave the EU would likely lead to slower economic growth and higher unemployment over the coming years.
In a final report following its annual review of the UK economy, the IMF said a vote to exit the bloc would have "a major negative effect" on the country's financial system, while it would also have damaging consequences for a number of other economies, primarily Ireland, Belgium and the Netherlands.
"While recognising that this choice is for UK voters to make and that their decision will reflect both economic and non-economic factors, directors agreed that the net economic effects of leaving the EU would likely be negative and substantial," the IMF said.
- abdulbasit@khaleejtimes.com