Tanzania has so far not suffered from the United Kingdom’s (UK) decision to part ways with the European Union (EU) and the negative impact would not be big if it occurs, the World Bank has said.
In a new report released last week, the global lender says the Brexit is expected to have only a modest impact on the country’s economy.
The UK is one of Tanzania’s top trading partners as well as a leading source of foreign capital and aid. The report says that the Brexit has particularly affected countries with strong links with the EU and the UK.
The report however cautions that under the worst case scenario, Brexit could reduce investment and financial flows from the two markets with foreign direct investment (FDI) suffering the most. The other major victim could be travel trade as the EU and the UK are among top tourists markets for Tanzania.
“The initial impact of the UK’s vote to leave the European Union turned out to be short-lived and largely localised to the UK,” the World Bank notes in the latest Tanzania Economic Update (TEU).
“However, the medium – to long-term repercussions are difficult to determine with these repercussions partly depending on how trade relations and financial flows unfold between the UK and the EU in the years to come,” it adds in the 9th edition of the report.
For example, the Bretton Woods institution explains, Standard Chartered and Barclays collectively hold about 15 per cent of assets in the country. A negative Brexit for the country therefore could automatically reduce investment and financial flows from British and European firms in the two major markets.
It adds that in recent years the UK and Switzerland accounted for more than 50 per cent of the total FDI inflows to Tanzania. Accordingly, it says that under the unlikely scenario of a Brexit-induced turbulence in the UK and other European economies, the impact on the FDI channel may be significant.
“Tourist visits from Europe may also decline hurting the country’s booming tourism sector, which employs more than half a million people and generates well over US$1.5 billion in foreign currency.”
According to analyst Calvin Ebun-Amu, Brexit encompasses not only a dramatic shift in economic and political ties in Europe but also in Africa where the UK, through its membership of the European Union was able to strengthen relationships with several nations on the continent.