Global violence continues to have a significant impact on economic performance.
The economic impact of violence on the global economy in 2019 was $14.5 trillion in purchasing power parity (PPP) terms. This figure is equivalent to 10.6 per cent of the world’s economic activity (gross world product) or $1,909 per person.
The economic impact of violence improved by 0.2 per cent from 2018 to 2019. The biggest improvement was in armed conflict, which decreased by 29 per cent to $521 billion. This decreased owed to a fall in the intensity of conflict in the Middle East and North Africa.
There was also a substantial reduction in the economic impact of terrorism, which fell by 48 per cent from 2018 to 2019. Violence continues to have a significant impact on economic performance around the globe.
In the ten countries most affected by violence, the average economic impact of violence was equivalent to 41 per cent of GDP on average, compared to under four per cent in the countries least affected by violence.
Syria, South Sudan, Afghanistan and Venezuela incurred the largest proportional economic cost of violence in 2019, equivalent to 60, 57, 51 and 48 per cent of GDP, respectively.
In 2019, reductions in armed conflict underpinned the 0.2 per cent year-on-year decrease in the economic impact of violence.
The fall in armed conflict in the Middle East and North Africa resulted in positive flow-on effects not only for conflict deaths, but also for the costs associated with refugees and internally displaced persons (IDPs) and terrorism, all of which fell in 2019.
This is the second year in a row recording a decrease in the economic impact of violence, after five straight years of rising costs. Between 2012 and 2017, the economic impact of violence rose by 10.2 per cent, increasing each year.
Consequently, in 2019, the economic impact of violence is $1.25 trillion higher than in 2012. This increase coincided with the start of the Syrian war and rising violence in Libya, Yemen and other parts of the MENA region.
The deceases coincided with the defeat of ISIL in both Iraq and Syria, which led to an improvement in the security situation in both countries in the past two years.
Regionally, Asia-Pacific recorded the highest economic impact at $3,399 billion in 2019.
Asia-Pacific’s high economic impact was due to the high levels of expenditure on internal security and the military, which in 2019 made up 82 per cent of the region’s total economic impact.
Asia-Pacific also has the largest population of all regions. Table 3.4 displays the military expenditure in the Asia-Pacific by country.
Similarly, in North America, internal security and military expenditure comprise 80% of the region’s economic impact.
The below figure displays the total 2019 economic impact by region and the percentage change in the economic impact from 2018. In 2019, four regions improved – MENA, Middle East and North Africa in the listed regions recorded the largest improvement from 2018, declining by 6.5 per cent.
The reduction in armed conflict drove the improvement in MENA, which fell by 25.6 per cent.
In 2019, the economic impact deteriorated in five regions. Central America and the Caribbean suffered the largest increase, however, it is also the region with the lowest economic impact, equal to $456 billion.
Central America and the Caribbean’s increase was driven by the deterioration in its economic impact of homicide, which increased by 18.5 per cent from 2018.
The global economic impact of violence is defined as the expenditure and economic effects related to “containing, preventing and dealing with the consequences of violence.”
The estimate includes the direct and indirect costs of violence, as well as an economic multiplier. The multiplier effect calculates the additional economic activity that would have accrued if the direct costs of violence had been avoided.
The term economic impact of violence covers the combined effect of direct and indirect costs and the multiplier effect. Meanwhile, the economic cost of violence represents the direct and indirect cost of violence. When a country avoids the economic impact of violence, it realises a peace dividend.