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