Brexit concerns are still low after voteGovernment departments held meetings yesterday to discuss the impact Brexit might have on the Korean economy.
After the British Parliament rejected Prime Minister Theresa May’s Brexit plan Tuesday - 432 against to 202 in favor - the Ministry of Economy and Finance gathered to discuss the implications. First Vice Minister Lee Ho-seung led the meeting.
Britain is now faced with the possibility of a disorderly exit from the European Union on March 29.
The Bank of England earlier warned that a no-deal Brexit will lead to economic challenges more severe than those during the 2008 financial crisis, when the British gross domestic product (GDP) dropped 8 percent.
“Although the possibility is low of a no-deal Brexit, even if it comes true, the impact on the real economy will be limited since trade with Britain is relatively insignificant,” said the Vice Minister Lee.
According to the government, annual exports to Britain total $5.4 billion - about 1 percent of all Korean exports - while imports total $6.2 billion - or about 1.3 percent.
“But there could be an indirect influence as a result of volatility in the international financial markets and the slowing of British and EU economic growth,” the vice minister added.
As such, Lee said the government will continue to closely monitor the situation and initiate a contingency plan if volatility in the foreign exchange and financial markets increase significantly.
The Ministry of Trade, Industry and Energy also called a meeting, together with officials from the Korea Trade-Investment Promotion Agency and Korea International Trade Association. It said it will act swiftly to minimize the impact of Brexit by creating a task force that will support Korean companies exporting to Britain and to the EU.
If Brexit results in losses for Korean exporters, it will offer assistance with measures such as liquidity and marketing support.
More broadly, the Korean government will pursue a bilateral free-trade agreement with the British government. A working-level group led by Kim Jeong-il, the ministry’s FTA policy director general, will be holding a two-day meeting with John Alty, Britain’s trade policy director general, in London starting Jan. 30.
The ministry said that during a meeting with Korean businesses in Europe earlier this month, many Korean companies expressed concern about the changes that would follow Brexit, such as those related to customs procedures, as well as approvals required by British and EU authorities.
According to the government, bilateral trade with the EU in 2017 hit an all-time record of $14.4 billion. As of November last year, the cumulative total was $11.6 billion.
The Korean financial market, along with other global markets, wasn’t heavily affected by news of the vote in Parliament. The market opened higher and held steady in positive territory until it closed up 0.43 percent.
All three U.S. indexes - the Dow Jones Industrial Average, the S&P 500 and the Nasdaq index - on Tuesday closed in positive territory on higher technology shares led by Netflix and on rising expectations about a Chinese-government stimulus plan.
“With the British government losing more than 200 votes in parliament, the position of British Prime Minister Theresa May has worsened and the political uncertainty has increased,” said Han Ji-young, analyst at Cape Investment & Securities. “But as the rejection in parliament was already one of the scenarios expected in the market, stocks globally responded calmly.”
The analyst added that Tuesday’s parliamentary vote doesn’t necessarily translate into a disorderly exit.
“Prime Minister May still has until Jan. 21 to come up with a Plan B, and the market is expecting other possibilities, including a negotiation and even a second public vote.”
KB Securities analyst Oh Jae-young, said expectations are still high that May will come up with a plan.
BY LEE HO-JEONG [firstname.lastname@example.org]
More in Economy
No more delays in shorter workweek, says labor minister
Better to give property than to receive a big tax bill
Border restrictions drastically cut North Korea's trade
Central bank holds rates steady, adjusts up GDP forecast