The UK’s decision to leave the European Union will have major economic implications for developing countries, with a cost of $3.8 billion to the economies of the world’s poorest countries in the coming year alone, experts at the Overseas Development Institute have warned.
Researchers at the UK-based think tank say the 10% devaluation of the pound since the vote to leave the EU, if sustained, and slower UK growth will hit exports from the least developed countries by an estimated $500 million. Bangladesh, Kenya, Mauritius and Fiji are expected to be hit particularly hard.
Furthermore, due to the devaluation, the value of UK remittances to recipients will be reduced by $1.4bn, with Nigeria and India hit by some $370m each, while the value of UK aid to developing countries will also fall by some $1.9bn. Similarly the value of UK aid to recipients will also be hit by 10%.
The findings have been published in a new paper by the Overseas Development Institute, ‘Brexit and development: how will developing countries be affected?’
Dirk Willem te Velde, head of the International Economic Development Group at ODI, said: ‘Whether the UK does end up leaving the EU or not, the impact of Brexit will have major economic implications for developing countries.
‘In the short-turn, the vote to leave the EU has already led to currency and stock fluctuations which have hit emerging markets and the devaluation of the pound is likely to further affect the value of export, remittances and aid for a number of developing countries.
‘In the long run, the effects on poorer countries will depend on the trade deals the UK is now able to negotiate around the world, and when done well they could benefit poorer countries. With the right policies in place it may also be possible to mitigate some of the economic shocks already being felt after the vote to leave.’
Phyllis Papadavid, team leader on International Macroeconomics at the ODI, said: 'The scope for further risk aversion in global financial markets, stemming from the UK, raises the risk for potential volatility in emerging and developing country currencies and higher borrowing costs, both of which would be harmful for growth prospects.'
For more information or to arrange an interview with one of the report authors contact James Rush on +44 (0)7808 791265 or email [email protected]