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BOJ Jamaica Chamber, weigh implications of 'surprise' Brexit

Published:Friday | June 24, 2016 | 12:00 AMMcPherse Thompson
CEO of the Jamaica Chamber of Commerce, Trevor Fearon.
John Robinson, Senior Deputy Governor of the Bank of Jamaica.

Jamaican businesses, caught unawares by the United Kingdom's vote last Thursday to leave the 28-member European Union, are now weighing the likely impact on commerce and the economy in general.

Jamaica Chamber of Commerce is now canvassing its members, especially exporters, about the likely consequences of the move.

"We are actually doing a poll with our members, particularly the export community, to get something a little bit more definite than just to say that it will be damaging," JCC CEO, Trevor Fearon told Sunday Business.

"We hope that by next week, we'll have a more definitive assessment," he said.


Increased uncertainty


Senior Governor of the Bank of Jamaica, John Robinson - admitting that he was "a bit surprised by the outcome because I thought they would have voted to remain" - says Brexit will lead to increased uncertainty and most likely a slowdown of global growth.

He adds that there will probably be an impact on oil prices because of the potential slowdown. On Friday, oil prices fell by US$2.47 to US$47.64 a barrel in New York, while Brent crude, the international benchmark, fell US$2.50 to US$48.41 a barrel in London.

The JCC made public its position against Brexit in May, saying, while the decision was for the British to make, Jamaica had a vested interest as the UK was its gateway to the larger European market.

"So from that perspective alone, if Britain is not a part of the EU, the gateway mechanism would obviously impact us. We are trying to get more definitive responses from some of the Jamaicans who are actually exporting to the UK as well as using the UK as a gateway to the EU," Fearon said.

Last month, the JCC joined other business groups across the Commonwealth in opposing Brexit. President Warren McDonald, in a joint statement with the business leaders, said then that "we consider the arrangement indispensable for Jamaica's economic sustainability and of great importance to the prosperity of our countries" and that "in large measure, our access to the EU has been through the gateway of the UK by virtue of our long and durable relationship".

The JCC's opposition comes even though the European mission in Jamaica assured that Britain's exit would not have any impact on Jamaica.

Robinson said that if the global economy slowed, there would be a concomitant slowdown in growth domestically

With global capital markets taking a hit on Friday as a direct result of the British decision, Robinson said, "I think we will need to keep heightened surveillance on our financial markets."

The good news, he said, is that given where Jamaica is "in our macroeconomic stabilisation and reform process, we are better placed than we ever were to handle interventions in the financial system and to keep a handle on our own macro-stability."


Pound sterling plunge


The pound sterling suffered a record plunge to a 31-year low on news of the 'Leave' vote, but Robinson believes that the currency will stabilise, noting that the Bank of England is standing by to provide liquidity, if needed, to ensure global market stability. A similar decision has been taken by the European Central Bank, the Bank of China and the Bank of Japan.

He said he believes that the risk to global growth will lead the US Federal Reserve to keep interest rates low for a while longer than July when it had planned a hike.

He said, too, that there is less of a likelihood of damage to the financial system, given the readiness of central banks to intervene.