World events also have an affect on a country’s economic state and a natural disaster can be very damaging and catastrophic for any country. Earthquakes, tornadoes, flooding and hurricanes will also harm people who live in that country and also the country’s infrastructure as well. Disasters such as these will also effect the country’s currency in a negative way. With loss of life and major factories being damaged, this will also add an uncertainty that natural disasters bring with them and is a bad thing for a country’s currency.
Damage to infrastructure is a main concern as it is this that is the economies backbone. Having to deal with the aftermath of a disaster the region and it’s output can become severely limited. Costs which are incurred after a disaster are for rebuilding and cleaning up, the government is responsible and so to is private spending for this. The problem with this is that the money used could have gone to the economy and the ventures it takes. But instead it goes towards making repairs which are part of a chain that has broken because of damage in the infrastructure. When you also add this to a decrease in spending by the consumer, this will cause people to lose confidence in the economy, which also means that what were once economic strengths become economic weaknesses. Especially when you start to compare it to other nations that could gain from this county’s loss by allowing them to prosper from the country that has had the disaster. No matter which country it is any disaster will hurt an economy very badly.
War is another thing that will have an affect on an economy. But a currency war is not what we are talking about. What we are talking about is when a country makes an attempt at devaluing their currency so that they can help their economy domestically in the trading of export globally. This then leads to a war which is physical and on the Forex. It almost works in the same way as a natural disaster, with damage done to the economy in the short term, and what this does is costs not only the citizens a lot of money but also the government too, which normally results in billions, and much of this money has to then be borrowed to help pay for it.