Canadian Underwriter

Political risks a US$800 billion drain on world economy: Aon

January 29, 2004   by Canadian Underwriter

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With the release of its annual "Political and Economic Risk Map", global broker Aon Corp. estimates political risks cost the world economy US$800 billion last year, the equivalent of a 0.25% tax on global GDP growth.
The losses come from reduced corporate spending, investment and growth the result from uncertainty over the world’s political and economic risks.
"In addition to concerns over terrorism, 2003 saw the return of traditional geo-political risks, such as general strikes in Nigeria, political insurgency in Venezuela, and the war in Iraq, as major drivers of economic performance," says Dr. Michel Leonard, chief economist for Aon’s trade credit and political risk practice.
Emerging markets in such places as Latin America and the Caribbean have felt the greatest impact of this uncertainty, with economic crises in Argentina and the Dominican Republic sending shockwaves through the region. In the U.S., the vulnerable dollar and terrorism risks have made investors wary. "In contrast to what occurred in 2001, the dollar, rather than the U.S. stock market, is likely to bear most of the negative impact in the event of new terrorist attacks on the U.S.," an Aon press release notes.

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