How Terrorism Affects the Global Economy


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Terrorist attacks have increasingly become frequent in today’s world. As a result, different feelings are elicited worldwide by various societies, including shock, uncertainty, and dread for the safety of their lives and livelihoods. However, despite all kinds of feelings, doubtfulness tops the list. Further, terrorism raises some unanswered questions in regards to who the perpetrators of such activities may be, how an attack was planned without detection, and whether the said incidence will recur or maybe it was just a single instance case. Moreover, due to uncertainty and security instability, the financial strength of the attacked nation is shaken causing ripple effects in the world. Notably, terrorism affects international economy both directly and indirectly. As a result, the production is disrupted worldwide, investors are scared of capitalizing in particular regions, and tourism which is a major revenue provider is inherently affected. Therefore, this research will extensively discuss on the negativities associated with terrorism globally with regards to the economic stability.

Disrupted Productivity

Terrorist activities disturb and hinder productivity globally. When the terror attacks occur, the developing countries are most hit, especially in the production sector. In explanation, small economies have very few specialized sectors that cannot withstand the financial instability resulting from the attacks. Moreover, when terrorism becomes a concern, the available resources concerning labor and capital are diverted from the affected sector to cater for minimally productive activities (Bandyopadhyay et al. 2). Further, due to lack of developed surveillance equipment and technologically advanced machinery, small economies may succumb to terrorism as they lack counterterrorism approaches.

On the other hand, rich and well-developed economies resiliently withstand terrorist attacks. In fact, the reason for their resistance is attributed to the larger diversified economy. Indeed, whenever an attack occurs and production within one sector becomes disrupted, the resources of the affected areas are diverted towards the steady programs. On the other hand, rich countries can easily prevent more terror attacks through applying the available counterterrorism methods because of the availability of advanced and modernized resources. However, despite a country’s financial stability, the economy becomes affected with consideration of the development stage at which the attacked nation has reached. For instance, the September 2001 attack on the USA affected its economic growth by less than 0.1% of its Growth Development Product (GDP) growth. On the other hand, Basque County has seen more than 10% reduced growth per its capita GDP due to its poor economic status during 1970-1990 (Todd et al. 1).

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Terror scares away Investors

Terrorism affects the international economy by scaring potential investors. Concisely, whenever terror attacks happen in a particular area, the expected capital returns simultaneously subside significantly. As a result, the investors become terrified due to risks that may face their investments leading them to shift their businesses to other economically stable nations (Todd et al. 2). Consequently, a reduction in productive capital stock and productivity enhancing approaches is experienced by the troubled nation. In fact, uncertainty is the principal reason as to why investors shift because they presume that the attacked region is insecure, making it is unsafe to invest. As a result, the affected nations greatly suffer from significant economic damages that reflect on other countries depending on them for capital products or services. In addition, if the terrorism perpetrators originate from abroad their native nations are hit hard by the attacked country regarding investment programs. In fact, investors from the affected country make significant cuts on the net investments they direct towards the government (Bandyopadhyay et al. 7).

Additionally, developing nations suffer from depressed aids from the strong economies considering that every available capital is directed towards the formation of other useful counterterrorism efforts. Moreover, due to uncertainty, individuals and nations presume that it is highly risky to trade with a region that has been afflicted by terrorist attacks. As a result, transaction costs rise considerably while business activities reduce significantly (Gassebner and Peter 20). For instance, the September 2011 attack exposed the American government severe repercussions regarding investment initiatives. Notably, various areas were closed down for extended periods. Indeed, the Canadian and US border was shut down, and continued to receive investment issues consistently due to the 9/11 terrorist activity. Therefore, recurrent attacks lead to reduced or failed trade between the tradeoff nations. In addition, economic activities fall by big percentages, especially when one nation is affected by terrorism (Todd et al. 3). Notably, a country that is recurrently faced with terrorist attacks faces a retarded economic growth within its sphere a problem that is distributed to other parts of the world.

Terror Attacks and Tourism

Terrorist activities significantly affect the global economy due to reduced revenue generation in the tourism sectors. Notably, countries that greatly depend on tourism for economic growth are adversely affected by terror attacks as their clients residing abroad shy away from visiting such destinations. Accordingly, Tunisia and Egypt are examples of countries that face reduced tourism revenues as they are recurrently afflicted by terrorism (DePuma 2). Concisely, whenever attacks are on the rise, tourists switch their destinations to safer nations. However, those who insist on visiting particular regions often shorten their stays or reduce the number of times they visit due to fear of being terrorist attacks while in other countries. Further, industries that depend on tourism; for instance, hotels, airlines, travel agencies, restaurants, and other tourism sectors are adversely affected by terrorism globally. For example, due to the September 11 attack on the US in 2001 acquiring a visa became a problem in America (Ranabhat 23). As a result, foreigners coming in to visit America now face severe difficulties before they can access the country.

Due to strict rules and policies on immigrants in America, the tourist sector received negative impact because many people refrain from undertaking difficult processes in an attempt to visit the United States. Notably, terrorists now use new approaches in perpetrating crime where they mainly target foreigners in particular countries (Ranabhat 9). As a result, different states advise their citizens against visiting terrorism-prone regions for fear of terror perpetrators. Nonetheless, while a tourist may restrain from visiting the countries of their choice due to fear of terrorist attacks the anxiety diminishes with time, especially if an attack took place only once (Ranabhat 11). However, the reactions elicited by people globally significantly affect the tourism industry as people are either forced to reserve their tickets or revoke their bookings. As a result, revenue generation recedes in the countries they wished to visit.


As it is evident from the analysis, terrorism has adverse effects on the economy which are difficult to eliminate. Nonetheless, the economic impacts resulting from terror lead to financially unstable states which later affect other dependent economies. In essence, production rate become disrupted, slowed, and sometimes fully destroyed. Nonetheless, developing economies face more challenges, unlike economically stable states which are more resilient to such attacks. On the other hand, investors are scared, especially in terror-stricken regions, while international aid dwindles as money is directed towards counterterrorism projects. Lastly, tourism as the revenue generating channel is affected in every facet starting from service providers for products associated with the sector.


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