Here are the top 10 risks to global economic growth right now: report
The Russian-Ukrainian war increased economic volatility as the US Volatility Index (VIX) and Economic Policy Uncertainty Index (EPU) rose. But the uptick is not as big as in March 2020 when the first wave of the COVID-19 pandemic hit the world.
According to a McKinsey report, economic volatility is surprisingly low during the conflict period. However, new potential risks to global economic growth have emerged as a direct result of the conflict.
The effects of war on the volatility of energy sources and prices can have dramatic effects on the entire world economy. Geopolitical instability is also a hindrance for companies because it prevents them from taking risks and from developing. According to the McKinsey Global Executive Sentiment Survey March 2022, geopolitical risk has replaced the pandemic and inflation as the biggest threat to global economic growth.
Here are 10 potential risks to global economic growth, according to the report
1. Geopolitical instability
More than half of the leaders who took part in the survey considered geopolitical instability to be the greatest potential risk to global economic development. Geopolitical unrest affects business confidence to take risks and increases uncertainty.
Rising inflation has impacted the cost of living, the cost of doing business, borrowing money, and every other facet of the economy. More than 35% of respondents cited inflation as one of the biggest potential risks to global economic growth.
3. Volatile energy prices
Since the beginning of the Russian-Ukrainian conflict, crude oil prices have reached an all-time high. Geopolitical tensions have increased instability in the Middle East and added to jitters in the oil market.
4. Supply chain disruptions
The conflict in Ukraine has forced most organizations to create more resilient supply chains. Europe’s over-reliance on natural gas and crude oil from Russia, as well as both Russia’s and Ukraine’s reliance on key agricultural products emerged as a major vulnerability for Europe. ‘Mondial economy.
5. Rising interest rates
To fight inflation, central banks around the world are raising interest rates. This affects borrowers and businesses in different ways as rates for financial products like loans and mortgages change.
6. Labor Shortages
The current global labor shortage is impacting the healthcare, transport, hospitality, social care and catering sectors. While COVID-19 sparked the trend, geopolitical tensions compounded the problem.
7. Increased economic volatility
The war increased economic volatility. Global coordination of sanctions has impacted businesses across all sectors globally. In addition, fluctuating energy prices have increased market volatility.
8. COVID-19 pandemic
COVID-19 continues to impact the global economy as the threat persists, particularly in parts of Greater China. China is the main supplier to many industries and supply disruptions due to shutdowns have caused many sectors such as the tech sector to cut production.
9. Domestic political conflict
Domestic political conflicts continue to be on the list as social tensions in many countries are on the rise. More than 10% of respondents mentioned it as a threat to economic development.
10. Trade Policy Changes
Over the past three years, several changes have been made to the trade policy of major economies such as the United States and the EU. With the changing dynamics of global relations, around 10% of business leaders view changing trade policy as a threat to economic growth.
(Edited by : Sudarsanan Mani)