Brexit fallout casts cloud over economy’s future
VOV.VN - The fallout of the UK referendum to leave the EU has led to uncertainty and volatility in the Vietnam financial markets, with the greatest impact to date being the depreciation of the British pound.
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A depreciating pound tends to have the immediate effect of making existing contracts with UK companies less profitable, he went on to say.
The devaluation of the UK pound will also negatively impact trade with both Vietnam and ASEAN as it makes prices of exports from these economies costlier than those of locally produced goods in the UK, said Professor Trinh.
“If the British pound goes down it takes the euro with it,” he said. “The Brexit vote, however, in the short term is expected to be small.”
“The long-term effects could potentially be much greater for both Vietnam and ASEAN if the vote represents a first step in the larger reversal of the globalization movement, however.”
Truong Dinh Tuyen, former Minister of Trade, in turn said Brexit could actually be beneficial for Vietnamese investment in both the UK and EU as it forces local companies to realign their investment strategies.
Uncertainty notwithstanding, some Vietnamese companies may want to take advantage of the depreciation of the pound and lower valuations to acquire quality assets in the UK, he pointed out.
As a result of Brexit, there are many opportunities ranging from strategic acquisition of UK companies for their technical knowhow and brand value to purchasing real estate at lower valuations.
He added that Vietnam and the EU have signed a free trade agreement, for which, the UK had been one of the biggest proponents, which is still on track for full ratification by the 27 remaining members of the EU.
The deal would remove most tariffs on goods made in Vietnam entering the EU, the world’s largest economy following final approval, starting in 2018 over a period of seven years, making them more attractive.
He noted that Vietnam might actually now be able to negotiate a slightly better deal with the UK separately, because it’s easier to find mutual benefits in bilateral negotiations than in multilateral trade talks.
Vietnamese companies that set up headquarters in London to use as a springboard to the EU economy, he noted, might now be forced to re-evaluate their investment strategies and concentrate on the EU as a separate market.
Le Thi Mai Huong from Van Hien University took a dimmer view of Brexit.
As a result, he stressed, the euro is now lower, particularly in counties such as Germany, and most experts say that will likely hurt Vietnam and ASEAN prospects for increased future exports, he underscored.
Prior to UK’s leaving the forecast for expanded exports on the horizon as a result of the free trade agreement between the two markets was bright, but now future forecasts have been cut back and are much bleaker.
As well, he said he worries, that investment flows into Vietnam and ASEAN are bound to slow as European manufacturers start cancelling foreign investment projects to reinvest in their home turf.
