Attacks in Europe and Australia: How terrorism affects economies
A recent spate of attacks in Europe has sparked increased terror fears worldwide (see timeline below). While tragic, such incidents are forecast to have a long-lasting effect on economies and the quality of living.
Katherine Bauer from US Department of the Treasury addressed an expert panel at a Saudi forum on May 22. She said: “Criminal activity in one country may be financing terrorism in other countries. We must not overlook crimes as they can lead to bigger terrorist activities in other areas of the world.”
5 shocking ways terrorism affects economies
The economic impact of violence on the global economy in 2015 was $13.6 trillion in purchasing power parity (PPP) terms, according to the figures from Global Peace Index (GPI).
To put this in macroeconomic perspective, the figure amounted to 13.3 per cent of the world’s GDP and it was nearly 11 times the size of global foreign direct investment.
If the lost money was distributed equally across the globe, every person would have received $1,876.
1. Destruction of infrastructure: Any terrorist activity begins with physical damage to properties. Numerous buildings, roads, railways and airports have been destructed in such incidents. These take a very huge share of governments’ fiscal budgets. Also, factories, machines, vehicles, skilled labourers and other resources are eliminated during the course of violence. In addition, damages to utility resources will have both short-term and long-term impacts on economy.
2. Uncertainty in markets: Markets are highly vulnerable to any development that catches the attention of investors. After the globalisation, markets have been responding to news-making events even if they are taking place miles away in a different country or a region. Shares in stock markets worldwide had fallen in response to militant attacks in Paris last year.
3. Investor confidence: Insurgent attacks have the highest potential to dampen the confidence of investors. As risk appetite of businesses wanes, they would turn away from investing in new markets or expanding in existing geographies.
Last year Syria, Iraq and Afghanistan incurred the largest economic impact as a percentage of their GDP at 54, 54 and 45 per cent of GDP respectively, according to the GPI 2016 report.
4. Peacebuilding spending: Governments spend billions of dollars after militant attacks in order to avoid such occurrence in future. For stepping up military strength and acquiring new weapons and technology as well as boosting intelligence many of the countries across the world allocate nearly half of their budget.
Following a suspected bombing of a Russian plane in Sinai in 2015, Egypt invested some $50 million in airport security.
5. Tourism: The most immediate impact of any violence will be felt on a country’s tourism sector, which is the backbone of economy in many parts of the world.
In 2010, 14.7 million tourists visited Egypt’s beaches and ancient sites but five years later the number of travellers plunged to just 9.3m as the country witnessed popular uprising and an array of terrorist attacks.
People tend to cancel or postpone their holidays, which directly affects airlines, tour operators, hotels, restaurants and retailers.
Terror timeline 2017
Here is a look at the worst terror attacks in Europe this year:
1. Paris Notre-Dame – June 6: Police shot a man who attacked an officer with a hammer outside the Notre-Dame cathedral in Paris. The man shouted “this is for Syria” during the attack, the interior minister said. Prosecutors have opened a terrorism investigation.
2. Melbourne – June 5: A former terror suspect with a “long record of violence” took a hostage in a suburban Australian apartment building on Monday.
One man was killed, and three police officers injured, as a result of the hostage standoff in the Melbourne suburb of Brighton, which ended after the attacker – since named as 29-year-old Yacub Khayre – was shot dead by police.
3. London Bridge terror attack – June 2: The London terror attack killed at least seven people and injured 58 others on London Bridge and in nearby Borough Market on Saturday.
Three knifemen were shot dead by police after mowing down pedestrians the bridge and going on a killing spree at pubs and restaurants at 10pm.
4. Manchester terror attack – May 22: The Manchester terror attack killed at least 22 people and injured 59 others at an Ariana Grande concert at Manchester Arena. A lone suicide bomber detonated explosives among teenage fans leaving the concert at 10.33pm
5. Paris shooting – April 20: A policeman was killed on the Champs Elysees in Paris and ISIS claimed responsibility for the killing, which happened days before the French presidential election. The gunman was named in the media as Karim Cheurfi, a 39-year-old man who allegedly served 15 years in prison for three attempted murders. The attacker was shot dead at the scene.
6. Stockholm attack – April 7: Four people were killed and at least fifteen were injured when a man drove a truck down a busy shopping street. Rakhmat Akilov, a failed asylum seeker from Uzbekistan, was arrested and charged in connection with the attack.
7. Westminster attack – March 22: London attacker Khalid Masood mowed down pedestrians on Westminster Bridge, killing two men and two women and injuring many others.
The knifeman crashed his car into the railings outside Parliament, got out and ran into New Palace Yard where he stabbed a brave police officer to death. Masood was shot dead by armed police.
8. Louvre knife attack – February 3: A knifeman was shot while trying to attack a group of soldiers guarding the Louvre in Paris. The attacker reportedly cried ‘Allahu Akbar’ and drew a machete on the soldiers after being told he could not enter the Louvre Carrousel shopping centre with two backpacks.