How Globalization and Deglobalization are Shaping Risk
In the face of a changing global risk landscape, we asked our Senior Economist, Bodhi Ganguli, to weigh in on the top five economic risks for finance leaders to monitor in the near-term.
1. Monetary Policy: It’s a Weak Link
Central banks have done much of the heavy lifting to mitigate the effects of the global recession. Almost all central banks are completely stretched. If there is another negative shock, they might not be able to provide the same monetary support.
2. Policy Coordination: Getting on the Same Page is Hard
In a post-Brexit world where geopolitical political division is becoming more common, it’s increasingly difficult for governments to work together. Fiscal policy makers and other leaders will need to agree on policies that balance global risk.
3. Geopolitical Uncertainty: More Unrest = Greater Risk
With rising fragments of various countries and economies experiencing upheaval, the impact of international laws and political relationships is at stake. Events such as Brexit raise questions such as, “What happens to migration laws? How does this affect the globe overall?”
4. Slowdown in Emerging Markets: Small Shifts, Big Impacts
Emerging markets, led by China, are starting to slow. Because China has contributed the most to the global economy among emerging markets, even a small decline in its growth has a big multiplier effect.
5. Discontentment and Deglobalization: Separation Anxiety
The inability of governments to pacify angry populations who are not receiving the full benefits of growth is a major risk factor. Deglobalization, or the process of purposeful political disconnection, is a result of discontented populations taking divisive political actions that might destabilize the government.
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