What is driving global volatility: Geopolitical constellations

What is driving global volatility: Geopolitical constellations

Looking ahead, the world is painted as becoming more fragmented
and brittle. Yet the challenges stakeholders face will be
increasingly interlinked and reverberating: Climate change, supply
chain interdependencies, making the energy transition, public
health, and inequities will impact on each other, requiring
coordinated responses. We expect the global political system,
including trade and security alliances, to become more fluid and
flexible as states co-operate across spheres of mutual interest and
contest across spheres of national security.

Geopolitical ripple effects

Global financial integration

  • Sanctions imposed on Russian individuals and entities raised
    reputational risks for businesses operating there, prompting a wave
    of corporate self-sanctioning. Prospects for Russian sanctions
    removal and corporate self-sanctioning reviews will depend on
    conflict trajectories, with additional Russian escalation
    increasing the risks further.
  • Inflationary pressures amplified by the Russia-Ukraine conflict
    and monetary policy tightening in developed markets led central
    banks to adopt a broad rethink of monetary policy. A wide range of
    Sub-Saharan Africa (Botswana, Ghana, Kenya, Malawi, Nigeria, South
    Africa, Uganda plus member states of the West African Economic and
    Monetary Union), is also seeing tighter monetary policy, with
    higher inflation likely to drag on overall economic activity.

Supply chain vulnerabilities

  • As a major agricultural producer, including among the world’s
    largest corn and wheat exporters in 2021, damage to Ukrainian
    infrastructure, blockades of the country’s ports arising out of the
    conflict with Russia, raised anxiety around global food security,
    particularly for key import markets in the Middle East.
  • Concerns over energy security arising out of Russia’s invasion
    of Ukraine has elevated questions over the energy transition
    timeline. In the nearer term, we expect to see a widening gap
    between those that can accelerate energy transitions and those less
    well-positioned. Still, financial markets and the private sector
    are likely to be key drivers toward net-zero in the pivotal window
    up to 2035 which will determine whether mid-century targets will be
  • China’s ongoing COVID containment policy has driven down its
    trade volume with knock-on impacts for global supply chains, ahead
    of this year’s consequential 20th Chinese Communist Party (CPC)
    Congress. We expect the “swift and decisive” regional COVID-19
    containment responses to remain through 2022.
  • The United States’ supply chain resilience strategy for key
    sectors – semiconductors, critical minerals, high-capacity
    batteries and pharmaceutical – is accelerating efforts to relocate
    production away from mainland China and into geographies closer to
    the US market or considered by the US administration to be

Global Security

  • The United States placing high importance on its Indo-Pacific
    strategy has generated a series of intelligence-sharing, security,
    and trading proposed initiatives including the Indo-Pacific
    Economic Framework and a proposed Partnership for Global
    Infrastructure and Investment to offset growing Chinese influence
    in the region.
  • The Russia-Ukraine conflict contributed to the establishment of
    a new North Atlantic Treaty Organization (NATO) Strategic Concept
    and drove Sweden and Finland to seek alliance membership, with
    accession for the two likely to be ratified on an accelerated
  • The negative economic effects of COVID-19, combined with the
    economic shocks caused by high inflation, supply chain disruptions
    and high energy costs, is likely to raise global political and
    unrest risks over the coming six months. Countries such as Ecuador
    and Sri Lanka have already experienced such stability with others
    such as Peru, Argentina, Pakistan, Tunisia and Lebanon amongst the
    countries facing the highest risks.


  • Russia’s invasion of Ukraine produced a mass population exodus
    with more than 5.5 million individual refugees recorded across
    Europe and up to a further 10 million internally displaced within
    Ukraine, leaving the international community to address a migration
    crisis at the center of Europe, likely to impact continental policy
    response, labor markets with sectoral impacts in the years

With analysis from Natznet Tesfay, Alex Kokcharov, Todd Lee,
Yating Xu, Lei Yi, Thea Fourie, Laurence Allan, Petya Barzilska,
Dijedon Imeri, Carlos Cardenas, Rafael Amiel, Emily Crowley, Jose
Sevilla-Macip, Deepa Kumar, Asad Ali, Jack Kennedy, Blanka

Posted 27 July 2022 by Lindsay Newman, Director, Economics & Country Risk, S&P Global Market Intelligence

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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