The Short, Medium and Long Term Impacts of Terrorism on the Economy

Topics: Economics, Cost, Attack Pages: 2 (366 words) Published: May 19, 2008
With the aid of a source from the internet I will tell the economic effects caused by terrorism in view of the 9/11 attacks.

I will talk about the impacts over periods of time. Firstly the immediate impacts (short term impacts)

Direct. Nearly 200,000 jobs were ruined or forced to move out of New York. Private businesses physical assets amounted to a loss of $14 billion. Amongst other related costs such as rescue, state and local government enterprises and clean up the total direct cost amounted to $27.2 billion.

Indirect. real GDP growth was instantly downgraded by 0.5 percentage points for 2001 and 1.2 percentage points for 2002. Some firms experienced an increase in demand such as security and information technology. Due to good economic crisis management short-term adverse economic impact of the attacks was far less than feared initially

Mid term impacts.

Due to the possibility of another attack, five main areas have felt significant impact. Insurance , Airlines, industries linked with travel eg tourism, shipping and increased defense/security expenditures. Losses from the terrorist attacks for the insurance industry are estimated at between $30 and $58 billion. The United States' airline industry was already in a weak financial position before the attacks with rising debt ratios and falling returns on investment, the attack meant cut backs of around 20 percent and great government support, airline passenger traffic still remained below normal. Other industries have also been badly affected, such as hotels, tourism, automobile rentals, travel agents, and civilian aircraft manufactures.

Long term impacts

A continual threat of terrorism which will have a long term potential of the global economy due to the increase in transaction costs, resulting in a reduction in potential output. These costs are as follows: Higher operating costs due to spending on security and insurance. Higher levels of inventories due to less reliable...
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