Crash presents greatest threat to GDP
NEW YORK — A stock-market crash could erase as much as $170.3 billion US from major cities’ gross domestic product in the U.S. and Canada and is the biggest threat to their economies, Lloyd’s of London said.
The losses, which represent about two per cent of combined GDP for the 35 cities studied, surpassed estimates for the impact of natural disasters such as floods and earthquakes as well as terrorist attacks, the Londonbased insurance market said Thursday in a report.
A crash that large has happened five times globally in the past 50 years, including when the 1999 dot-com bubble burst and the financial crisis struck in 2008. Losses forecast in the analysis include supply-chain interruptions and declines in corporations’ revenue, according to the report, which was based on research by Cambridge University.
“Market crash puts the most GDP at risk globally — representing nearly a quarter of all cities’ potential losses,” Lloyd’s said. “Man-made threats are becoming increasingly significant.”
The report didn’t quantify what constitutes market crashes, other than to say they feature “extreme correlated mass movement of share prices.”
Oil-price shocks or a cyber attack, which could each cost more than $90 billion US, were the next-biggest threats in North America, the report said.
Market crashes, cyber attacks, power failures and nuclear accidents account for almost a third of GDP at risk worldwide, Lloyd’s said.
Floods were the fourth-largest risk in North America, representing $76.8 billion US of possible damage, while a human pandemic could wipe out $56.5 billion US of GDP.