“Brexit-proliferation” may affect the Norwegian economy

Chelsea Flower ShowA Chelsea Pensioner passes in front of the UK Independence Party (UKIP) pro-brexit campaign bus, parked in front of the Chelsea Flower Show in London, Britain May 28, 2016. REUTERS/Neil Hall

If the British leave the EU and this leads to increased concern and uncertainty in Europe, it could have significant consequences for the Norwegian economy, according to a chief analyst. Much is however unclear.

– If Brexit essentially becomes a problem just for the British economy, this will affect Norway very little,  chief analyst Erik Bruce of Nordea Markets said  to the news agency NTB.
– But if Brexit triggers a demand from people in other countries for a vote, and we see distrust of the Eurosystem and turmoil around the Euro, then this can create much greater consequences for Norway, he explains.
Much is thus uncertain.
Firstly, the yes side is now ahead with 53 against 47 per cent for the exit side, according to an average of six polls this week. It is therefore most likely that the British will vote to remain in the EU in the referendum on 23 June.
Secondly, it is impossible to predict what consequences it will have for the UK, Europe and the world economy if the British were to vote for a so-called Brexit. It will however be most likely that a British EU withdrawal will happen fairly peacefully, thinks Bruce.
There has been no lack of warnings that the British economy will grow more slowly if the country opts out of the EU. This will however probably have little direct impact on the Norwegian economy, because only 8 percent of the Norwegian mainland exports go to the United Kingdom.
The problems for Norway will primarily occur if a British exit causes ripples, according to Bruce.
– If the desire to take risks and the demand for risky assets fades, Norway to be affected in the same way as other countries, and perhaps harder if oil prices fall at the same time he writes in an analysis.
Bruce sees in this case a poorer growth prospect for Norway and demand for new interest rate cuts.
The consequences will be more serious for Norway if a British EU withdrawal  leads to other EU countries initiating similar processes.
– This may weaken prospects for the EU and weaken the Euro. This can also strengthen the Norwegian krone significantly, he writes.

Facts about UK and EU
* Britain has been an EU member since 1973.
* The country has not joined the eurozone or a common European currency.
* The British have not joined the Schengen agreement, which is a set of rules for joint border controls in Europe.
* On June 23  UK is holding a referendum to decide whether the country should remain a EU member or leave the union.

Source: NTB scanpix / Norway Today