As Britain struggles to come to terms with its decision to leave the European Union, countries around the world are assessing how Brexit will affect their own interests.
Here in the UAE and the wider GCC region, there is a general consensus among bankers and economists that any negative effects will be short-lived.
On Saturday the UAE Central Bank said that UAE financial institutions will be unaffected by the uncertainty over the decision, due to “limited interconnectedness between the UAE and UK financial systems”.
Some economists warned that a weaker UK economy may prevent some investment from this region into the UK and vice versa, and have effects on inbound tourism as Britons will be reluctant to travel in the long-term if the pound continues to devalue.
However, the overriding sentiment was that the UAE economy would escape unscathed as it was an issue affecting the EU alone, with the negative affects from the volatility currently seen in the global markets believed to be a short-term issue.
“Nobody can truly say for sure what this will ultimately mean to the global economy, but investors hate uncertainty. Does this impact the UAE economy? Directly it shouldn’t,” said Jameel Ahmad, Vice President of the forex platform FXTM.
On Sunday, Dubai stocks suffered their worst day since January, as the UAE digested the UK’s shock decision. The Dubai Financial Market General Index fell by 4.7 per cent in early trading on Sunday, before regaining ground to finish 3.25 per cent lower at 3,258.17, its steepest one-day fall since January.
Yesterday, however, it ended the day 0.8 per cent up – a trend reflected in other Middle Eastern and Asian bourses that also dodged the sell-off seen in Europe and the US.
From a personal finance point of view, UAE residents with links to the UK are likely to be the most affected – how much so will depend on which side of the pound they sit on.
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Sterling closed down about 8 per cent at $1.37 on Friday, a 31-year-low for the currency, extending its losses further on Monday with some pundits talking of $1.10 by the end of the year.
That means you are earning in dirhams and want to remit to the UK, then you’re in luck. The dirham is currently hovering around AED5 to the pound. A rate this low has seen many British expatriates living in the UAE piling into their local exchange house to send dirhams back home.
But UAE residents travelling to the UK this summer on holiday will also gain with their dirhams buying them more spending money.
However, if you are heavily invested in the UK, either in stocks or property, your fortunes will not be so good.
On Friday, the real estate agency Cluttons said buyers from the Arabian Gulf will find the price of an average prime Central London residential asset US$96,000 less than it was on June 20.
On the other hand, if you plan to invest in UK property, you may have a better deal on your hands as your dollar-backed dirhams are worth more and there is talk the UK property market will experience a slowdown due to the current instability.
Those fearful of investing at this time are advised to take a long-term approach.
“The underlying strengths of the UK economy remain in place, and ultimately real estate is an investment that works best for those who pursue long-term goals,” the broker Knight Frank said.
However, it’s difficult to predict how far-reaching the effects of Brexit will be. The UK is currently scouting for a new prime minster, after David Cameron sensationally resigned just hours after the result of the vote was announced. And Article 50, the procedure that governs a member state leaving the EU, is yet to be issued.
That creates uncertainly, something the financial world does not like. For now, it’s a time to wait and see and not make any hasty decisions around your personal finances.