After Britons voted to quit the European Union, stock markets around the word saw declines, as did various currencies including the British pound and Canadian dollar.
Many Canadians panicked as they remembered the economic crisis in 2008.
Here are 5 ways the Canadian economic scenario will be impacted by Brexit:
Financial investments are likely to be hit. “The more European equities investors have, the bigger the hit is going to be,” Birenbaum with Queensbury Strategies said.
[pullquote align=”normal” cite=”Eric Lascelles, RBC”]”We continue to operate on the assumption that markets will first overreact, and then reclaim some of their losses,”[/pullquote]
However, most financial experts reassured clients that there is no financial crisis like that of 2008 predicted in the near future.”We continue to operate on the assumption that markets will first overreact, and then reclaim some of their losses,” Eric Lascelles, RBC chief economist said.
While the possibility of global contagion is real, this was not as dramatic as during the financial crisis, he added.Other experts have advised clients to look at Brexit as a buying opportunity as many investors could sell their stocks for cheap due to the present market instinct and fear.
The housing market too is expected to be impacted by Brexit. Due to the economic uncertainty which Brexit has sparked off, there is speculation the Bank of England could soon cut interest rates. The U.S which was looking to hike rates in September may delay the plan.
Canadian interest rates are expected to remain low for an even longer period. This could be a bane for the housing markets in many Canadian cities which are already becoming out of reach for many people.
While property prices may rise, it could only be due to the struggling global economy which could hurt the housing market in the long run.So are we sure there won’t be a recession?
Experts feel that Brexit makes the global growth outlook appear dim at the moment. The real concern would be if other European countries choose to follow Britain’s lead and flee the EU, which could cause great uncertainty and could potentially lead to an unraveling of the European Union.Most economists have their eyes trained on EU now. Brexit could also hamper growth in the global economy and the Canadian economy for a short while.
Canadian companies doing direct business with the UK will feel the most direct and immediate fallout. U.K.’s trade relations now remain under a deep cloud of uncertainty. However, the U.K. accounts for only 2.5 per cent of Canadian trade, so the overall effect on companies here will be minimal.However companies that are doing business in the U.K. must now contend with real economic uncertainty.
The loonie fell when the news of Brexit reached markets. Experts believe that the loonie will continue to fall in the further months due to the economic uncertainty worldwide. But the decline is nothing to be too fearful of.Overall it can be said that while Brexit is a concern for the Canadian economy, it is not as bad as it could have been.