Global Watch

Global Watch: November 2001 Special Issue: The impact of the terrorist attacks in the U.S. on the global economy(Full Text)

It will take time to grasp the overall impact of the terrorist attacks in the U.S. on the global economy, and there is considerable uncertainty about the developments of the war. We can try, however, to estimate the impact on the global economy based on three scenarios: The first scenario assumes that the war will not last long and a decline in consumption in the U.S. will not be serious. The second scenario also assumes that the war will not last long, but a decline in consumption in the U.S. will be substantial. The third scenario assumes that the war will continue even in 2003.

The extent of the impact is different according to the scenarios and the countries. The difference among the three scenarios is insignificant in terms of the growth rate of the U.S. economy in 2001. It will be slashed by 0.3 percent points or 0.5 percent points depending on the scenario. Meanwhile, the growth rate in 2002 will differ by a larger margin depending on the scenarios. In the first scenario, it will be cut by only 0.7 percent points, but by 2.3 percent points in the second and third scenarios. The growth rate of the Japanese economy will be reduced by 0.7 to 1.3 percent points in 2001 and by 0.3 to 1.8 percent points in 2002. The growth rate will also fall in Europe and Asia, but the impact on the Chinese economy seems to be marginal .