TOPIC :ECONOMIC

INSTABILITY
GROUP MEMBER :
ALI HAIDER

MUHAMMAD RAMEEZ

MUNEEBA TEHREEM

ABUBAKAR SIDDIQUE
Economic Instability:
Causes, Effects, and
Impact on Business
Economic instability refers to the volatility and unpredictability of economic
conditions in a country or global economy. In this presentation, we will explore
the causes, effects, and impact of economic instability on businesses.
Historical Overview
Pakistan Economy Crisis Example

In the past few decades, Pakistan has faced several economic crises that have led to periods of instability. One such
example is the financial crisis of 2008, which had a significant impact on the country's economy. The crisis resulted
in a sharp decline in foreign investment, increasing inflation, and a rise in unemployment rates.

Another example is the energy crisis in Pakistan, which has led to frequent power outages and negatively affected
businesses across various sectors. These historical examples highlight the challenges and consequences faced by the
Pakistani economy during times of instability.
Causes of Economic Instability

1 Policy Changes 2 Political Instability

Changes in economic policies, Political unrest, government

such as tax reforms or trade
regulations, can create
uncertainty among businesses
and investors, leading to
economic instability.
changes, or civil conflicts can
disrupt the economic
environment and undermine
business confidence, resulting
in economic instability.

3 Global Events

Global events, such as economic recessions, natural disasters, or

geopolitical tensions, can have ripple effects on the global economy and
cause economic instability.
Effects of Economic Instability

1 Unemployment Fluctuations

Economic instability can lead to fluctuations in the job market, with

periods of high unemployment rates as businesses struggle to stay afloat
during economic downturns.

2 Inflation Relationship

Economic instability can also result in inflationary pressures, where the

purchasing power of the currency decreases, leading to rising prices for
goods and services.
Impact on Business
1 Decline in Business Confidence

Economic instability erodes business confidence, making companies

hesitant to make investments or take risks, leading to a slowdown in
economic growth.

2 Effects on Investments

Economic instability can impact investments, with investors becoming

more cautious and reallocating their funds to more stable markets or
asset classes.
Examples of Economic Instability: Pakistan
Economy Crisis
1 In recent years, Pakistan
has experienced various
economic crises that have
had a significant impact on
businesses. For instance,
the devaluation of the
Pakistani rupee has
resulted in increased
import costs, affecting
businesses reliant on
imported raw materials or
products.
2 Another example is the
stock market crash in 2017,
where the Pakistan Stock
Exchange (PSX)
experienced a significant
decline, leading to
financial losses for
investors and a decrease in
investor confidence.
3 The energy crisis in
Pakistan, characterized by
widespread power outages
and energy shortages, has
had a detrimental effect on
businesses, particularly
those reliant on a
consistent and stable
supply of electricity.
Solutions and Mitigation Strategies
1 Diversification of 2 Investment in 3 Effective Governance
Economy Infrastructure

Promoting a diverse range Improving infrastructure, Implementing transparent

of industries and reducing
dependence on a single
sector can help mitigate the
impact of economic
instability.
such as power generation
and transportation
networks, can enhance
economic stability and
attract investment.
and stable governance
systems can promote
economic stability by
reducing corruption and
ensuring policy
consistency.
The Role of Government
1 Economic Policies
The government plays a
crucial role in creating and
implementing economic
policies that promote stability,
attract investments, and foster
business growth.
2 Fiscal and Monetary
Measures
Through fiscal and monetary
measures, such as taxation
and interest rate adjustments,
the government can stimulate
the economy and minimize
the impact of economic
instability.

3 Collaboration with Business Community

Engaging with the business community and seeking their input can help
the government develop effective policies that address the challenges
faced during times of economic instability.
Conclusion
Economic instability has far-reaching implications on businesses, leading to uncertainty, decreased investment, and
reduced economic growth. Understanding the causes and effects of economic instability can help businesses and
policymakers develop strategies to mitigate its impact and foster a more stable economic environment.