The Brexit Nightmare Begins

The nightmare of rising market volatility has begun with the British public finally deciding to leave the European Union (EU). Last week, banks were busy preparing for the possibility of the worst scenario. With business confidence tumbling, there is a playback of past financial crises, where foreign funds in global financial markets, including emerging markets, were suddenly pulled back to their home country.

Here in Indonesia, the scenario would start with a weakening of the rupiah, followed by rising interest rates, to stem the foreign funds outflow, which inevitably halts our already slow economic growth. The nightmare gets worse with the continued weak global economy, as it negates a rapid economic recovery, as in previous financial crises. With uncertainty over the United Kingdom's (UK) access to the European market, its economy and the pound are expected to take a significant hit.

June 28, 2016