According to Pravin Gordhan, the Finance Minister in the South African government, in case the United Kingdom leaves the EU after this week’s referendum, things in South Africa can become more complicated. The Brexit referendum will be organized this Thursday and it can affect African and global economy too. Minister Gordhan pointed out that these effects may not be visible right away, especially when it comes to trade, but the fact that the situation will bring many uncertainties will make everything difficult. Of course, Mr. Gordhan said that in case South Africa follows these events closely and carefully and acts in a timely manner, this country will be able to avoid recession.
However, not all economists share his views. For instance, Dawie Roodt, an experienced economist from South Africa, says that South African economy will experience problems regardless of the outcome of this referendum. This expert also claims that the world economy is still experiencing problems despite the fact that the global financial crisis is finished. It was the monetary policy of central banks around the world that helped countries avoid more serious troubles.
The decision of the Federal Reserve of the United States to temporarily stop the restrictions on monetary policy and the low-interest rates contributed to fewer problematic effects. If it wasn’t for their role, the crisis would’ve been already here. Brexit can change these things.
On the other hand, Iraj Abedian, a popular economist from SA, says that if the referendum is successful, the impact that this result will have on the European Union would be significantly lower compared to the impact on the economy in general and the South African economy which is quite natural. Obviously, the United Kingdom and Europe will be put at risk first, but it won’t take much time before the entire world feels the consequences. It is a well-known fact that the European Union and the United Kingdom are among the most important trading partners of this country. So, if there is a negative effect on their economies, these effects will be reflected on the South African economy too.
Speaking to a corporate photographer and videographer in Toronto, Mr. Roodt said that he is convinced that a leave decision will make the Euro stronger than before and that the dollar will experience positive effects. However, the British pound and few other currencies related to the pound will suffer and the rand is not an exception.
The global economy today is connected more than ever. Even before this referendum is held, it already has an impact on the currencies and financial markets worldwide. Even though no one can tell what exactly will happen in case the British people decide to say goodbye to the European Union there are scenarios in which people of South Africa will have to deal with slower growth, high inflation and increased interest rates. Even though some experts predict that the EU too will go into recession, but according to Roodt, the European Union is always in recession and this doesn’t change the facts. On the other hand, a vote to stay will stabilize the markets.
So, there is no doubt that London remains to be one of the most important centers when it comes to economy and finance not just in Europe, but in the world. The referendum this Thursday will greatly affect the South African economy.