The Effect of Popular Movements to Global Economy

Friday, 11 February 2011 07:39

Written by Julius

Battering stock markets, surge in oil prices and a slowdown in global economy are expected as popular movements in Tunisia, Algeria, Jordan, Yemen, Lebanon and now Egypt, sparked, causing internal political instability. The fact that these countries belong to Middle Eastern and North African regions, where most large oil producers could be found, further reinforces the expectations by analysts that the effects of these civil unrests would reverberate around the world.

The week following the widespread Egyptian uprising, benchmark oil prices rose by $3.70 or 4.3 percent, settling at $89.34 per barrel on the New York Mercantile Exchange. Oil futures trading in Asia also soared by 87 cents of 1%, at $90.21 per barrel.

As expected, the Egyptian stock market suffered serious financial setbacks, with shares falling down by 17% after the weekend's closing. But the effects of Egyptian turmoil also manifested in the neighboring important economies, with Dubai and Oman stock markets falling down by 4.3% and 3%, respectively. Saudi Arabia also reeled from the political crisis, with its stock market falling down 2.5%, after a 6% slide over the weekend.

Analysts fear that if the political tensions continued and spread over the Middle Eastern and North African regions, the subsequent and sustained increase in oil prices would slow down global recovery. Several European economies that were badly hit by the recession could suffer contraction, not to mention that the continuing effects of the global downturn are still felt.

The civil unrest in Egypt began after thousands of demonstrators gathered in the main streets of Cairo and Alexandria to call for the resignation of the Egyptian President Hosni Mubarak. Protesters also demand economic and political reforms.

The widespread uprising could continue over weekend, as Mubarak still has not resigned, but instead fired his whole Cabinet and installed a new prime minister and vice president.