Political risk cost 800 billion dollars for global economy: report
Wed Jan 28, 3:46 PM ET Add Business - AFP to My Yahoo!
CHICAGO (AFP) - Worries about terrorism and other political risks cost the global economy more than 800 billion dollars by cutting corporate spending, investments and growth in 2003, a survey showed.
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That compares to an estimated 200 billion dollars prior to the September 11, 2001 terrorist attacks, according to the report by US insurance firm Aon.
Aon economist Michel Leonard said the global cost of political risk could reach one trillion dollars this year, claiming that this uncertainty imposed the equivalent of a 0.25 percentage point "geopolitical tax" on global economic growth.
"In addition to concerns over terrorism, 2003 saw the return of traditional geo-political risks such as general strikes in Nigeria, political insurgency in Venezuela, and the war in Iraq (news - web sites) as major drivers of economic performance," he said.
Leonard says the combination of terrorism and traditional political risks substantially decreased the risk tolerance of investors, exporters, and bankers, impacting global trade and investment.
The impact is particularly severe on emerging markets, noting that Latin America and the Caribbean, still suffering from the aftershocks of Argentina, saw foreign direct investment drop for the fourth consecutive year.
Leonard said the dollar's recent weakness makes it increasingly vulnerable to geopolitical uncertainties, particularly terrorism.
In contrast to what occurred in 2001, he said that the dollar, rather than the US stock market, is likely to bear most of the negative impact in the event of new terrorist attacks on the United States. |
