Global Macroeconomic Risk Map - 2022
The Global Macroeconomic Risk Map - 2022
When Russia invaded Ukraine, vital grain export routes shut down in Ukraine’s Port of Odesa—causing global food prices to soar.
Since then, energy markets have been disrupted, leading European heating costs to skyrocket. Meanwhile, global inflation is high, and central banks around the world are raising interest rates in response to rising price pressures.
This Markets in a Minute from New York Life Investments shows the world macroeconomic risk map in 2022 against a shifting economic landscape.
Increasing Challenges
After the U.S. increased interest rates in the 1980s, many emerging markets fell into crisis as debt payments (denominated in U.S. dollars) rose. Fast forward 10 years later, and rising U.S. interest rates triggered the Mexican peso crisis in 1994.
More recently, in 2013, when the Fed began tapering its bond purchases, it led to steep investment outflows from India, Indonesia, and Brazil.
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Today, as U.S. interest rates rise at the fastest pace in decades, emerging markets are facing new pressures. The good news is that some countries are absorbing the shock thanks to higher bank reserves and reasonable growth. However, at the same time, high inflation and social unrest are fueling higher risk.
?Future Risks
With these factors in mind, the chart below looks at the top 10 geopolitical risks looking ahead, according to risk consulting firm Kroll.?
The risk of Russia entirely cutting off gas supplies to Europe could present increasing challenges, especially into 2023 and 2024. This year, Russia’s gas supplies to Europe have reduced by half, causing energy prices to hit record highs. The energy crunch has precipitated corporate bailouts, including one of the highest in Germany’s history.
Global food insecurity could also accelerate if a supply crunch worsens. Russia and Ukraine supply 10% of the world’s calories and provide 26 countries with at least half of their grain products.
Another potential risk is the trend towards deglobalization. While this can be difficult to measure, some data points towards this shift. Over the past few years, world trade to GDP has stagnated after rising for several decades.