According to the Report, Global geopolitical risks remain elevated, raising concerns about their potential impact for macro financial stability.
Geopolitical Risks
- Multiple threats to supply chains: Geopolitical rivalries, conflict, competition for resources, cyberattacks, etc.
- Tectonic shifts in power, economic centers and trade: New trade alliances and investment hubs are redefining global power dynamics.
- A fragmented tax environment. E.g., Minimum global tax is becoming adopted by many countries, while others are withdrawing from multilateral tax policy.
- Demographic, technological and cultural pressures on workforces: E.g., Aging populations, mass retirement, falling birth rates (in developed markets), culture wars, AI integration, etc.
Implications of geopolitical risks
- Sovereign Risk: Increased military spending and economic downturns raise public-debt-to-GDP ratios, escalating fiscal sustainability concerns and sovereign risk.
- Financial Contagion: Geopolitical risks can spill over to other economies through trade & financial linkages, raising the risk of contagion.
- Macroeconomic Impact: Increased geopolitical risk can lead to economic disruptions, such as supply chain disruptions and capital flow reversals.
- Investor Confidence: Geopolitical risks generally lower investor confidence, leading to market uncertainty and increased volatility.
- E.g., The U.S.-China trade war significantly impacted stock prices in both economies
Key Policy Recommendations for Geopolitical Risks
|
