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Israeli Economy

Brexit has many countries worrying about the long-term economic implications of the move, while Israel’s Ministry of Finance believes that Israel’s market will not be harmed by the UK’s departure from the EU, and may even benefit from it.

The United Kingdom’s historic vote last week to leave the 28-nation European Union (EU) has sent shockwaves throughout Europe and the international community, pushing markets around the world to plummet.

According to a report published Sunday by Israel’s Ministry of Finance, which has established a special team to monitor Brexit’s developments, the financial implications of last week’s referendum are not necessarily negative, from Israel’s financial perspective.

Israel Radio reported that the Finance Ministry estimates that the UK’s exit is likely to increase uncertainty, lower investors’ confidence, and cause a series of tremors to the financial market in Britain and across Europe.

The British economy is the fifth largest in the world and the second in Europe, yet it is less than 4 percent of the global GDP, equivalent to about only one sixth of the US GDP.

According to the ministry’s report, a recession in the UK, in light of the damage to its exports, is not likely to bring about a real global crisis, but it may contribute to volatility in capital markets that will accompany the ongoing process of exiting the EU.

“The global effects will depend on the extent of the British economy’s crisis and the degree of spillover to EU countries,” the report said.

Meanwhile, the Finance Ministry estimated that the impact of volatility in global markets on Israel’s capital markets will be similar to that of the 2012 Eurozone crisis, following which the Israeli indexes declined by 6.5 percent.

If growth in the UK, and to a lesser extent, growth in the EU suffers, the Finance Ministry believes that it could lead to a certain decline in the demand for Israeli exports.

“However, it is possible that the UK’s exit from the EU will improve Israel’s ability to compete in the European market, which is a major destination for Israeli exported goods,” the report assessed.

By: United with Israel Staff