Economic implications

08-10-2001

Besides the security implications of the latest developments, the US-led fight against global terrorism also leaves open many questions concerning the economic implications. Economic analyst Martin Kupka from Patria Finance perceives a threefold effect of the terrorist attacks and retaliatory measures on the world economy:

"There is an immediate impact on some branches like airlines or insurance companies which have been severely hit by the attacks and they have to cut their profit outlooks and risk costs etc. On the other hand, for instance, I think that insurance companies can benefit from the situation for they will raise premiums etc. But the airlines, specifically, the impact is quite hard. Then there are some longer-term implications, for instance, the consumption demand in the United States in the recent days and weeks has decreased which will have, of course, implications for the GDP growth. I would expect that the terrorist attacks in this respect will somewhat damage the economic growth. But on the other hand, we should take into account that economic deceleration was a fact even before the terrorist attacks. So, what happened in the recent week just further decelerates the growth."

The question now is whether the development will eventually result in a world-wide recession or whether it will just hit some countries. As far as the Czech Republic is concerned, its export-oriented economy is more vulnerable to external factors:

"As far as the Czech economy is concerned, it is heavily dependent on the demand for Czech exports, namely from the EU markets. And because the European Union decelerates, the Czech economy is also going to grow than it would have grown otherwise. I think that despite what has been going on, the Czech economy will still show a relatively significant growth rates, 3 percent at least, which is I think potentially attractive for foreign investors coming to this country. Central European countries have been perceived by some analysts as a relatively safe harbour for their investments. And, of course, I think we will also pay some cost as the growth rate will be slightly lower."

08-10-2001