Pandemic stresses will result in increased global political risk throughout 2021 and beyond
- Published: Tuesday, 13 April 2021 09:23
According to a new report by Marsh pandemic-induced economic stress will continue to exacerbate global political risk throughout 2021 and will amplify the threats facing already-fragile economies.
The Political Risk Map 2021, which is published by Marsh Specialty, shows larger increases than ever before in country economic risk across all regions globally. This is being driven by increases in deficit spending over the last 12 months, which is adding to sovereign and commercial credit risks in the less developed economies of the world. According to the report, the strains on public financing in emerging markets will result from increases in sovereign indebtedness and may create unfavorable / unfavourable conditions for domestic and foreign-owned businesses.
Findings from this year's Political Risk Map 2021 mirror those in the World Economic Forum's Global Risks Report 2021, which reported that the COVID-19 pandemic is increasing disparities between emerging economies and industrialized nations. It is also driving social fragmentation which, in the next 5-10 years, will weaken geopolitical stability.
According to this year’s report, social inequality is a pervasive risk across multiple regions – particularly in the Americas and Europe. In the future, inequality is likely to influence elections, contribute to political and economic nationalism, and could create conditions that spark open conflict.
As a result of the COVID-19 pandemic, many countries established or amended state-backed trade credit schemes to provide economic stability. While these programs are currently supporting domestic trade and exports, critics argue they are keeping zombie companies – those with heavy debt burdens and low cash reserves – alive. The Political Risk Map 2021 points to the risk of mass bankruptcies among zombie companies once these government-backed schemes expire.
The Political Risk Map 2021 is based on data from Marsh Specialty’s World Risk Review platform. It rates 197 countries and territories across nine indicators relating to security, trading, and investments. The interactive map can be used to help multinationals make more informed decisions about how to deploy their financial resources and manage the risks associated with their operations, assets, investments, and contracts in the year ahead.