Attacks such as the Bali bombings could result in a 'terror tax' that would undermine global growth by raising costs and making international investors more wary of risks, the International Monetary Fund (IMF) says.
The IMF's chief economist, Kenneth Rogoff, said in Singapore yesterday the attacks underscored the terrorist threat around the world.
But he said it was too soon to assess the regional economic damage wrought by the latest strike, although it was possible that the impact will be relatively limited and short-lived.
The remarks came after leaders in Singapore and Malaysia said the Bali attacks could undermine international investors' confidence in a region that was already losing capital to the fast-growing Chinese economy.
'The security issue is not just a regional issue, it is a global one,' Mr Rogoff said at a presentation on the IMF's latest projections for global growth. 'The costs of dealing with security include heightened insurance premiums, higher costs of protection and surveillance, and many indirect costs, including on investors' perceptions of risk,' he said.
'The long-term outlook on the global economy is still dominated by very positive trends . . . but the impact of terror eats into this, at least a little, if nothing else slowing down the gains from increasing globalisation. One can think of there being a 'terror tax' on the global economy.' The Indonesian currency and stocks dropped sharply in the aftermath of the weekend strikes.
The assault is expected to devastate Indonesia's tourism industry, which accounts for 12 per cent of gross domestic product.
