Top Risks and Scenarios: Q1 2024
1. Geopolitical tensions
The global economy will continue to face potential disruptions from geopolitical volatility, especially the Israel-Hamas war as well as shipping disruptions in the Red Sea. These disruptions create trade vulnerabilities and possibly renewed supply shortages.
The ongoing war in Ukraine could also lead to a renewed spike in global commodity prices if tensions escalate.
2. Challenges in China
The real estate market in China remains unstable and could turn into a deeper crisis amid ongoing default risks of major companies in the sector.
This could cause significant damage to the global economy.
3. Higher-for-longer interest rates
Restrictive monetary policy is a central driver of sharper-than-expected economic slowdowns.
Tight labour markets and persistent inflation could lead to a prolonged period of high interest rates, which would further weaken global growth.
4. Debt distress
The risk of a spiralling debt crisis is probable in an environment of high borrowing costs.
Developing countries are especially vulnerable with wider implications for global economic prospects.
Global Risk Index and Scenarios
The main downside scenario threatening the economy is global fragmentation where the trade landscape becomes progressively disrupted and fragmented. Real GDP grows 2.4% and inflation reaches 6.6% in 2024. Businesses could face higher costs and reduced access to markets while consumers experience higher prices and limited options.
Geopolitical tensions could also cause a commodity price hike where real GDP growth reaches 2.2% and inflation surges to 7.5% in 2024. Lower production and export restrictions on commodities due to climate change and protectionism also raise the risk of this scenario.
Stagflation—stagnant economic activity combined with high inflation—is another scenario that impedes global economic prospects. Real GDP slows to 1.7% in 2024 while inflation rises to 6.4 %. Further disruption to global energy and food supply, resulting from the war in Ukraine and other emerging conflicts, could lead to this outcome.
Probability of a global fragmentation scenario
Probability of a commodity price hike scenario
Probability of a global stagflation scenario
Source: Euromonitor International Macro Model
Note: Global Risk Index ranks scenarios by the expected global GDP impact, calculated as the three-year cumulative global real GDP impact relative to baseline scenario multiplied by its one-year probability, relative to the average global downside risks probability. The index is based on 62 of the world’s major economies (representing more than 90% of global GDP at PPP). The higher the index score, the higher the risk of the scenario to the global economy.