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Brexit and the domestic real economy

Author Kang, Duyong; Min, Sunghwan; Hong, Sungwook; Shin, Hyonsoo Date 2016.08.16 Issue No 632

It takes more than 2 years for Brexit to be complete. And many uncertainties are accompanied in the process. Thus, Brexit is a variable that bears many risks for a certain period of time.


Brexit can have an influence on the real economy of Korea both at home and abroad. It can have an impact on trade channels such as EU business influence and indirect channels such as economic sentiment and financial shrinkage. How much influence it will have depends on how Brexit will proceed.

IMF expects that 2017 global economic growth rate will differ from 2.8% to 3.4% depending on how Brexit proceeds.


If Brexit ends smoothly (Soft Exit), its impact on real economy is expected to be limited.

The proportions of export of Korea to the U.K. and to EU are not large for they are 1.4% and 1.9% respectively. Therefore, the influence of Brexit on real economy is limited in this case.


To the contrary, if Brexit proceeds extremely or EU integration is weakened additionally (Hard Exit), its negative impact on domestic real economy is inevitable.

To see each industry, Brexit will have a larger impact on shipbuilding, and auto industry with high portion of export to EU.


Until the end of Brexit, thorough monitoring of development and preparation are necessary in case things get worse.


Learning lessons from Brexit and exclusive populism, we need to exert our pressure to evenly allocate benefits of globalization.