Insider Monkey
30 Most Unstable Countries in the World
Ramish Cheema
9 min read

In this piece, we will take a look at the 30 most unstable countries in the world. For more countries, head on over to 5 Most Unstable Countries in the World.

Political stability is the precursor to economic stability. This is due to the fact that investors seek a stable environment for their money, and a country where there is a consistent change of government does not make policies that last for a suitable time period to generate investment returns. Additionally, political upheaval also leads to country shutdowns or protests which prevent businesses from carrying out their daily operations. Therefore, some of the most developed countries in the world have seen decades of stability while those countries that are struggling economically are also facing political crises and uncertainty.

Given the crucial link between the two, there are numerous studies and research papers that further study this topic. On this front, a working paper from the International Monetary Fund (IMF) takes a detailed look at how stability is essential for economic development. It uses a generalized method of moments (GMM) estimator to find out the link between degrees of political instability and gross domestic product (GDP) growth. The IMF's research defines political stability as the number of cabinet changes in a year. For those out of the loop, a cabinet here is a collection of ministers that is headed by a prime minister in most countries. The IMF's research finds out that every time there is a cabinet change, GDP growth drops by a painful 2.39 percentage points.

Another research paper covering analyzing political and economic instability comes from Harvard University. It uses a single equation method to evaluate the link between instability, which is measured as a combination of economic and political variables to calculate government change and economic growth measured through a sum of the government change and other variables of growth. The Harvard research also mirrors the conclusions of the IMF, as it points out that political instability not only affects GDP growth but also per capita income.

Narrowing down our focus on how this instability affects the business environment and what the situation is these days, insurance broker Marsh released a new report in March 2023. It outlines that a country's inward focus on economic stability comes at the expense of free trade and ends up affecting the global trade environment. It adds that the commodity market shock resulting from the Russian invasion of Ukraine has led to soaring inflation in developing countries. However, according to Marsh, there are four key areas that can support growth despite the political instability. These, according to the research firm, are a large potential for infrastructure development that had stopped due to lockdowns ushered in by the coronavirus pandemic, the energy and food insecurity due to the Russian invasion creates an opportunity to invest in supply chain stability, the guidelines in the Paris Agreement to invest in global net zero emissions technologies, and growth in government spending to combat terrorism and other threats.

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