What Does the Future Hold for Global Investors? Doubts Still Remain over the Economic Fallout from the US Led Invasion of Iraq. While Oil Prices Have Fallen, the Prospect for Global Growth Is Uncertain. (View from the City)

By Siddiqi, Moin | African Business, June 2003 | Go to article overview

What Does the Future Hold for Global Investors? Doubts Still Remain over the Economic Fallout from the US Led Invasion of Iraq. While Oil Prices Have Fallen, the Prospect for Global Growth Is Uncertain. (View from the City)


Siddiqi, Moin, African Business


In the aftermath of US-led conquest of largely defenceless Iraq, resulting in losses of many innocent civilian lives and severe damages to physical infrastructures - excluding, however, the most valuable assets (the multi-billions dollars oilfields) - western investors are now hoping to see more settled economic climate over coming months.

Besides concerns about Saddam Hussein's arsenal of weapons of mass destruction - so far unfounded - the real motives of US administration for attacking Iraq were to end months of financial markets' turmoil and rising crude prices.

However, markets are exceptionally fortunate that Baghdad, but not Pyongyang was the target of 'regime change' because sluggish world economy would have been in dire problems had Americans invaded Stalinist North Korea. The country possesses unspecified number of nuclear weapons, thus the capability of retaliating against foreign invaders. Whereas Saddam Hussein's regime was full of rhetoric, The Financial Times (London), commented: "Iraq was the story of America's unparalleled military might. North Korea is the testimony to its limits. The regime in Pyongyang is every bit as nasty as Mr. Hussein's was. Probably more so. It is also a lot more dangerous.

CHEAPER OIL

We should be thankful to the long-suffering Iraqi nation for dismantling 'risk-premium' to oil prices - in place since September 2002 - when President Bush first indicated his intentions of attacking Iraq, with or without United Nation's approval.

From pure financial perspective, a successful Iraqi adventure should in coming months present hefty dividends and improve market confidence. Crude oil is probably the most essential commodity in the world economy today, hence its price affects industry costs everywhere. In richer countries, which mostly import energy, trends in oil markets have a big impact on consumer spending power.

The Persian Gulf's oil supplies (the source of two-thirds of globe's proven reserves) remained intact during the brief military hostilities. Nightmare scenarios had oil prices sky-rocketing to $80-$100/a barrel in the event of Iraqi chemical or biological attacks upon Saudi Arabian or Kuwaiti oilfields. A prolonged costly war might have pushed global economy into recession - on the scale of the 1930s Great Depression.

Fortunately, crude prices have plunged 40% from a peak of almost $40 in mid-March to around $24 now. Cheaper energy prices means lower business costs and higher profit margins. That, in turn, means more dividends for shareholders, better prospects for business investment, growth and shares, Economists calculate that $10 drop in oil prices is equivalent to a $55 tax cut for US businesses and consumers. The main ingredients for a growing economy are rising stock markets - underpinned by consumer confidence and falling energy prices. Ben Bernanke, the Governor of the Federal Reserve (US Central Bank), said: "Most factors point to a moderate pick up in business investment and economic growth in the second half of 2003 and in 2004."

How STRONG A POST-WAR RECOVERY?

The underlining strength of global economy and corporate profitability were questionable long before US-onslaught on Iraq. New research by international organisations have indicated continuous 'lacklustre' economic growth in most regions. The International Monetary Fund (IMF), noted: "It is unlikely that sputtering global growth will suddenly lunge ahead into an immediate strong recovery." It anticipates world output growth of 3.2% this year and 4.1% in 2004. The Fund is optimistic about recovery in Sub-Sahara Africa, where growth is forecast to hit 6.4% next year (up from 4.2% in 2003), underpinned by improved economic governance in most countries and higher non-fuel commodity prices.

The Organisation for Economic Co-operation and Development (OECD) - the influential club of 30 richest nations - is less upbeat about growth outlook than the IMF. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

What Does the Future Hold for Global Investors? Doubts Still Remain over the Economic Fallout from the US Led Invasion of Iraq. While Oil Prices Have Fallen, the Prospect for Global Growth Is Uncertain. (View from the City)
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.