July 13 (SeeNews) - Countries in Central and Eastern European (CEE) will be impacted by UK's decision to leave the EU in a non-binding consultative referendum on June 23, rating agency S&P Global Ratings said on Wednesday.
Downside risks to growth have already started to rise across the region, S&P said in its CEE Rating Trends Mid-Year 2016 report.
Currently, S&P has negative outlooks on three of its 17 CEE sovereign ratings - Poland, Croatia, and Montenegro, and stable outlooks on the other 14.
According to S&P analysts, the Brexit decision may exacerbate political uncertainty in CEE on several fronts.
"Non-eurozone sovereigns among the EU members, such as the Visegrad countries but also countries of South Eastern Europe like Bulgaria, Croatia, and Romania, may fear increased dominance by eurozone countries, notably France and Germany, further complicating policymaking within the EU," it said.
Also, eurosceptic parties across CEE could see tailwinds that will further complicate the region's relations with the EU, they added.
The pro-Brexit vote could also impact EU accession countries in CEE, for instance Turkey or the Western Balkans, which may see their chances for EU accession diminished.
"With intra-EU tensions on the rise, appetite for further enlargement may be diminished for the foreseeable future. These prospects may increase political tensions in these countries and lessen their focus on institutional and economic reform that is an important pre-condition for becoming a EU member," the ratings agency added.
The CEE economies could also be impacted through various different channels but mostly on a flow rather than stock basis, S&P commented.
"A reduction of EU structural funds which are an important driver of public and private sector investments, will certainly be on the table, at the latest in the next EU financial planning period after 2020", the agency said.
Also, remittances from CEE's sizable diaspora in the U.K. could be reduced, while other financial flows may fall as well.
Lastly, exports to the U.K., and more importantly to the eurozone, may see a drag as a result of the slowdown of economic activity resulting from the increased uncertainty after the Brexit vote, the agency concluded.