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posted on 22 May 2017

Conflict's Legacy For Growth

from the International Monetary Fund

Conflict has been on the rise since the early 2000s given the wars in Afghanistan, Iraq, and Syria.

Conflict leads not only to immeasurable human costs, but also to substantial economic losses with consequences that can persist for years. The tragic rise in conflict has weighed on global GDP growth in recent years, given the increasing number of countries experiencing strife, the severe effect on economic activity, and the considerable size of some of the affected economies.

The IMF’s most recent World Economic Outlook (Box 1.1) takes a closer look through the lens of conflict’s impact on economic growth and migration.

Countries currently involved in conflict accounted for 1 to 2.5 percent of GDP in 2010. The World Economic Outlook measured conflict based on severity - if there are at least 50, 100, or 150 conflict-related deaths per million people in the country and for three different periods: 2002 to 2005, 2006 to 2009, and 2010 to 2015. The share of global GDP affected by conflict is based on the first year in each period, before the negative effects of conflict on GDP have fully materialized.

To have some sense of how large these effects might be, the WEO also shows the difference between pre-conflict GDP forecasts and actual GDP during conflict. The relative fall in GDP has been dramatic in some of the countries in conflict. For example, in the most extreme case in Libya, GDP contracted by a cumulative 80 percent during its latest conflict, before starting to recover. The Central African Republic, Ukraine and Yemen have all also seen cumulative GDP contractions, as large as 15-40 percent during conflicts.

The effects of conflict on a country are large and include long-term damage. Conflict means less investment in a country. People’s health is damaged, many leave the country as refugees or economic migrants, they cannot attend school - all of which effect a country’s economy for many years.


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