Could the Bali Bombs Stall Global Economic Recovery? ; BUSINESS ANALYSIS Stockmarkets and Currencies across South-East Asia Have Fallen Sharply, Awakening Memories of the 1997 Asian Crisis
Philip Thornton Economics Correspondent, The Independent (London, England)
THE BOMBING outrage in Indonesia has awakened fears that a global campaign of terror could derail a recovery for the world's economy.
Analysts have started to count the economic cost of the terrorist attacks in Bali amid speculation that the doubtless devastating impact on the Asian nation's economy could ripple across the Pacific, and perhaps even further.
What effects will the bombs have on financial stability and economic growth? Will world markets suffer if Indonesia collapses; and will consumer and business confidence crumble in the wake of a renewed terror campaign?
In terms of economic activity, the rebound in growth had already started to splutter and this latest shock will do little to boost confidence. Kenneth Rogoff, the chief economist at the International Monetary Fund, said: "One can think of there being a terror tax on the global economy." He warned of a repeat of the aftermath of the 11 September attacks last year, which triggered a jump in insurance, security and protection costs. "It's plausible that the economic effects on growth next year in the region will be limited," he added. "But that outcome is of course sensitive to how the security situation evolves, how policy responds and above all what the effects are on business and consumer confidence, domestically and in the rest of the world."
Meanwhile, share prices across the region suffered another volatile trading day after falling sharply on Monday. Indonesian shares failed to make up much of the 12 per cent lost the previous day while markets in the Philippines and Malaysia closed lower. On the currency markets Indonesia's central bank intervened to prop up the rupiah after Monday's 4 per cent fall, while the Singapore dollar, Thai bhat and Philippine peso all fell. The strains on South- east Asia's financial markets prompted flashbacks to 1997 when those Asia nations became the first victims of the financial crisis that came within a whisker of bringing down the entire global economy. But this time there was little sign of any domino- effect sweeping the world, where most markets continued to mount a solid recovery on the back of growing optimism that the worst is over for the world economy.
There was wide agreement that the bomb blasts would have a severe impact on the Indonesian economy. Analysts said tourism and foreign investment would be hit as fun-seekers and profit-hunters sought safer destinations. Caroline Bain, the senior Asian economist for the Economist Intelligence Unit (EIU) in London, said: "It takes Bali out of action for a couple of years and could wreck its position as a tourist destination."
The 4 million tourists who arrive every year provide 6 per cent of Indonesia's foreign exchange earnings, of which the …
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Publication information: Article title: Could the Bali Bombs Stall Global Economic Recovery? ; BUSINESS ANALYSIS Stockmarkets and Currencies across South-East Asia Have Fallen Sharply, Awakening Memories of the 1997 Asian Crisis. Contributors: Philip Thornton Economics Correspondent - Author. Newspaper title: The Independent (London, England). Publication date: October 16, 2002. Page number: 24. © 2009 The Independent - London. Provided by ProQuest LLC. All Rights Reserved.
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