Indeed, countries with acute and sustained crises, such as Yemen, Libya and Ukraine have shown significant declines in economic growth, investment propensity and foreign trade as hostilities have escalated. The significance of such conflicts for German foreign trade can be assessed by means of a new indicator computed from the intensity of the conflict in partner countries and their share of total trade. This conflict index has so far shown only minor fluctuations, and these have largely been caused by slight changes in the assessment of conflict in important partner countries. By contrast, the conflicts that have really escalated in recent years have had little effect on German foreign trade. However, should conflicts arise in larger partner countries or regions with international significance, this could rapidly change. The oil price shocks of the 1970s demonstrated only too clearly how quickly regional hostilities can impact on the global economy.
The Impact of Intense and Escalating Conflicts on Economic Performance and on German Foreign Trade
Be they vague threats to peace or full-scale wars, conflicts place a considerable burden on the economies affected. Companies are more reluctant to invest when the stable business environment necessary for investment is lacking. Countries that are particularly prone to conflict show, on average, significantly lower growth and investment rates than comparable emerging and developing countries.
- Hubertus Bardt ·
- IW-Trends No. 1 ·
- 5 April 2018