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Brexit not to have major impact on India: Moody's

Moody's does not expect the UK's vote to leave the European Union to have a significant credit impact on Asia Pacific sovereigns

IANS  |  Chennai 

Brexit not to have major impact on India: Moody's

The UK's decision to exit the will not have any significant credit impact on and other countries in the Pacific region, Moody's Investors Service said on Monday.

However, in case of countries where fiscal and monetary policy space is constrained, a shift in portfolio and/or banking flows in some Pacific markets might hurt growth, said the credit rating agency.

While the fiscal and monetary policy space is constrained in its exposure to external financing is limited, it said in its latest report.

Moody's does not expect the UK's vote to leave the to have a significant credit impact on Pacific sovereigns.

"In particular, although lower GDP (gross domestic product) growth in the will dampen demand for products from the rest of the world, Asia Pacific's direct trade linkages with the country are generally limited," Moody's said.

"However, in the months to follow, announcements related to could trigger market volatility. While not our baseline expectation, a shift in portfolio and/or banking flows that resulted in tighter financing conditions in some markets would hurt growth, especially in countries where fiscal and monetary policy space is constrained," Moody's said.

Moody's assume UK's GDP growth will slow to 1.2% in 2017, from 1.6% this year, as uncertainty over future trade relations with the results in lower investment and potentially lower household consumption.

"In our base case scenario, we do not expect (Britain's exit of European Union) to have a significant impact on the EU economy as a whole. Also considering the limited exposure of sovereigns to demand, we do not foresee a large impact on trade or GDP growth in the region," Moody's said.

"A prolonged period of lower portfolio or banking flows would imply tighter financing conditions and hurt GDP growth for the affected economies. Where monetary and/or fiscal room is available, policy easing could act as a buffer," Moody's said.

"In and Pakistan, too, room for fiscal policy easing is constrained by a high debt burden, but the two sovereigns' exposure to external financing is limited," the credit rating agency said.

First Published: Mon, July 11 2016. 14:22 IST
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