- Economists agree that Brexit will be damaging to the UK economy and wider EU
- Fortunately markets appear to be bouncing back from initial post-vote falls
- Some market watchers believe that the US could benefit from Brexit
- World leaders must respond to anti-globalisation fears behind the vote
Economists around the world generally agree that a Brexit will be damaging to the UK economy and wider European Union for some time to come, but some believe that it could give the US nd the world at large fresh impetus.
When the majority of British voters voted to leave the EU in a referendum last Thursday, global markets lost $3 trillion in paper losses between Friday and Monday, according to S&P Global.
Brexit is likely to hurt the UK economy, but the US could actually benefit from the wake-up call to heed widespread anti-globalisation sentiment. Photo: iStock
Markets appear to be bouncing back, however, and academics and economists believe that while the damage might be long-lasting to the UK if and when a proper Brexit occurs, the US could benefit.
"The big giant is the US and, unlike what most people are saying, I don't think that it's obvious that this is a negative for the US" Alan Blinder, Economics Professor at Princeton University told CNBC on Wednesday.
"For example, I remember the East Asian crisis in 1997-1998 which was bad for the world economy and a lot of people thought it was going to drag down the US but it was the reverse," he said, speaking to CNBC in Sintra, Portugal, where the European Central Bank
is holding its annual forum on central banking.
"It's one huge question mark. There is potential(ly) very large downside for the UK and it's hard to imagine any upside. For Europe I think it's a sizable but probably not Titanic(-sized) downside but nobody really knows, it's not like we have a lot of experience with things like that."
He said such uncertainty was bound to deter investment in Western Europe. "If you were a European multinational or a UK one thinking of siting a facility somewhere to serve the world, it's not obvious at all that you go to the EU or UK at all with this gigantic question mark hanging over everybody's head."
Backlash against globalisation
Blinder said he believed that the Federal Reserve
would hold off making another interest rate increase in both July and September, "as these things go, September is a long way off and we'll know a lot more about the world economic reaction to Brexit by September than we do now."
Andrew Sheng, distinguished fellow of Fung Global Institute, a Hong Kong-based global think tank, told CNBC that a Brexit was a "wake-up call to the whole world" and was a reaction against globalisation.
"I think that those people who feel that they don't have enough access to resources and feel that life is unequal to them are blaming globalidation and I think we have to listen to them," he told CNBC in Sintra. "We have to realize that the world has changed very, very fast and people are worried about their jobs, they're worried about immigration and so Brexit is a wake-up call to all of us."
He said he expected to see change as a result of the vote. "People need to realise that during this time of almost traumatic or transformative change such as technology, climate change, migration, terrorism – all these are very confusing and there's where leadership needs to come in and tell people that we have way forward. Then once everyone realises what we have a stake in it (the future), then we'll all move together."
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– Edited by Robert Ryan