Terrorism whether it’s national or global has the same impact on the economy. There are both indirect and direct effects on the economic growth of any country. For any country’s economy, there is a need to have peace among the communities. Economic development cannot occur without peace and security. According to experts and economists, terrorism not only takes people’s lives but also creates hatred and impacts the economy to a great extent. If there’s terrorism and violence destroy the human capital then it will positively affect economic growth.
As per the 2017 Global Terrorism Index (PDF), the estimated impact of terrorism was about $ 84 billion in 2016. Be it market, tourism, and trade, everything gets impacted because of terrorism. If it is global terrorism then also countries will get impacted in many ways as they all are connected via trade, education, defense, and many more.
According to a report, the economic impact of terrorism has increased in the last two decades. Let’s understand how an economy gets affected by the terrorist acts.
Direct physical destruction
Physical destruction is the most immediate impact that can be seen after the terrorist acts. Terrorists mainly target public places where they can cause larger destruction. Right from transportation to companies, all these get destroyed in the terrorism and directly cause the economic destructed.
One of the unforgettable instances is the large-scale terrorist attacks on the World Trade Center on Sept. 11, 2001. In those bombings, thousands of people were killed and properties worth billions were destroyed.
- The physical destruction of terrorism is always negative and huge for the economy
- Productive resources of the country that generates valuable services and products get destructured by terrorist acts.
- All these destructions cause property damage and ultimately impact the economy.
- One of the most obvious economic destruction that happens because of terrorism is the property and lives.
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Creates market uncertainty
If any country is under terrorism, it impacts global markets. Global investors restrain themselves from doing business, deals, and partnerships with terrorism-affected countries. The high level of violence and terror acts loses the confidence of investors both domestically and globally. Because of this, there will be a sharp decrease in domestic as well as foreign investments.
Even if there are no terrorist attacks in the nearby areas, the country will still be negatively impacted indirectly. This happens because a market doesn’t like uncertainty and terrorism causes a lot of it. One of the clear examples of market uncertainty is the Sept 11, 2001 attack that caused financial markets to shut down until several months. This research is done by our best assignment editing helper Eddie Broke.
- The rise of threats and global terrorism cause markets more resilient.
- International investment and cooperation for any country get lower because of threats and terrorism.
Impacts on travelers and tourism
Tourism in any country no doubt plays a crucial role in economic development. The generation of employment, income, and foreign exchange earnings are some of how tourism contributes to boosting the economic development of the country.
When it comes to terrorism, one of the sectors that get more affected is tourism. If any country is under violence or terrorist attack, there won’t be any tourists visiting that place. A decline in the tourism sector means an indirect impact on the country’s economic development. You can also read about accounting assignment help.
Less foreign direct investment
Foreign direct investment (FDI) is one of the important aspects that is critical to a country’s economic development. Why it is so? The generation of foreign cash helps the country to increase productivity, improve infrastructure, and increase employment. FDI directly contributes to the economic development of the country.
However, terrorism, be it global or national, negatively impacts international trade. The threats of terrorism and violence ultimately cause compromised trade routes and less foreign direct investment.
Countries that are affected by terror acts put a good amount of finance and manpower to overcome terrorism. So, there will be less finance for economic and social development. In this way, it can be said that terrorism is negatively affecting economic growth nationally and internationally.
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