Prime
Will E. Africa weather Brexit storm?
As arrangements for the climax to Brexit approach, the world awaits anxiously for the outcomes from the uncertainties that embroil the possibility of a deal or no deal spat between the European Union and the United Kingdom.
Of recent, Theresa May, the UK Prime Minister has been entangled in questions and answers in the UK Parliament to defend her governments deal now dubbed the May Deal and surviving the no confidence vote propelled by her opponents. Furthermore, another option is the No Brexit deal.
This, however, is contingent on holding another referendum, which could prove costly in both time and money for the concerned parties.
To unbundle these deals, the May Deal is meant to stimulate investment and consumption with much more certainty about the future of the UK.
The different deal is to have a much easier and flexible Brexit with continued membership to a single common market with the EU. The No Brexit deal is meant to maintain the status quo with unimpeded access to the EU market like it was before.
To put this into perspective, the East African region’s economic outlook has been recovering following shocks from the fall in global oil prices and other commodity prices despite the spiraling debt to GDP ratios exhibited recently.
However, this promising growth outlook is threatened by outcomes from the Brexit deals.
From hindsight, the most positive of these deals to East African regional growth would be the No Brexit deal as it enables small economies to trade with a larger integrated market hence enjoying economies of scale albeit plausible, but far-fetched for now.
The actual dent to the growth of the East African economies would be the May Deal, which seems to be more inward looking trying to champion a nationalistic cause first and then think about the global village after sorting home.
The other different Brexit deal would much less offer the same prescription to the regional growth as the May Deal, but on a miniscule level. To understand this, the UK has for long been a major player in the EU market and for it to leave, would shock other economies, especially those that trade with the EU hence dampening their growth projections.
Hitherto East African countries trade with the EU being their major export market on the globe making them susceptible to such risks.
In addition, the UK leaving the EU market would imply creation of fragmented markets, which leads to markets becoming inefficient and developing diseconomies of scale hence a surge in the cost of production, which will in turn make the goods exported less competitive on the global market.
As such, this will stifle the growth of regional economies more significantly in the long-run as in the short-run, they might manage to absorb some of the shocks due to concerted government efforts. The big question is, how shall we weather through the Brexit storm when it comes to pass?
Ronald Ochen,
[email protected]
