Along with global economic imbalance, an epidemic, and socio-political unrest ushering in 2020, here are the top 10 risks for the rest of the year.
Decoupling of Supply Chains
The U.S.-China trade war, Brexit, weakening of NATO, and the decline of the European manufacturing sector could see a few listless years ahead for global trade. Global economic growth has tempered to 2.5%, and trade expansion has come to an impasse.
Our Assessment: With Brexit to be operationalised at the end of the year, financial predicament would engender high levels of uncertainty and disruption of trade. The crisis in China is bound to affect overall global commerce (23% of imports worldwide are from China) as factories remain shut while the pandemic persists.
2 Degrees away from Destruction
Ecological imbalances make up one of the greatest risks in 2020. Countries are on the track of 3.5-degree warming after failing to adhere to the Paris Agreement. This is a whole 2-degrees above the norm stipulated to control global warming.
Our Assessment: Multilateral and multi-stakeholder coordination is the need of the hour. The rise of nationalist policies that favour local production certainly acts as an impediment to free trade. The civil society will continue to press investors and companies to adopt greener business practices.
The China Trade
Beijing might be emboldened to part ways with the U.S. after a series of adverse policy measures by the latter. President Xi Jinping has called for a break to China's technological dependence on the U.S. It shall now expend its efforts to redefine technology, trade, and financial architecture to suits its own interests.
Our Assessment: This trend will extend beyond the $5 trillion global tech sector, to include trade agreements, industries, and institutions as well. There could be further financial sanctions (over Xinjiang or Hong Kong) and efforts to limit U.S. capital to Chinese firms. In turn, China will continue to restrict space for foreigners by limiting freedom to operate.
Background: With the escalation of COVID 19, it is time to look seriously into how future pandemics can be contained. A pernicious climate, weakening ecological systems, and the spread of the anti-vaxxer movement necessitate precautions against new diseases.
Our Assessment: There is a need to change the way we look at outbreaks and how to contain them. Instead of waiting for vaccines to come around, we must further study and infer about undetected viruses that could plausibly infect the world. A shift is needed in the way that tests, vaccines, and drugs are made.
A Threat to Democracy
Elections in the U.S. are at risk in 2020 because the very idea of democracy will be tested in unprecedented ways. We would see a U.S. election that many will view as illegitimate (According to a 2019 poll by IPSOS, only 53% of the public believed the presidential election would be fair), and a foreign policy environment that is suboptimal. A failed impeachment and a series of court challenges could make this the most volatile year for politics the U.S.
Our Assessment: Things may look different if the Democrats win enough seats to control the Congress. Trump's vacillations will confuse and jeopardise longstanding relationships, especially with South Korea, Japan, India, Taiwan, and Saudi Arabia.
EU gets Stern
With the U.K. leaving the EU, there are concerns that EU foreign policy is not robust. The EU wants to equip itself to react to unfair practices and anticipate further unilateral decisions by its commercial partners. They have also put pressure on China to level the playing field on procurement from the EU, so that European firms get improved access to the Chinese market.
Our Assessment: A resurgent Europe creates risks of antagonising the United States, as Trump is no longer a supporter of the EU According to Ian Bremmer, "much as China insists that the world accept One China, Two Systems, a more assertive Europe will try to insist that China accept One System, 28 States."
The Middle East Kerfuffle
The U.S. policy of intransigence toward the Shia-led nations in the Middle East is faltering. This creates significant risks for stability in the Middle East, including a conflict with Iran; a surge in oil prices; and a rogue Syria involved with Moscow and Tehran.
Our Assessment: The U.S.-Iran relationship will be volatile and destabilising. Lethal skirmishes in Iraq between the U.S. and Iranian forces are likely. This paves the way for Russia's influence in the Middle East. World energy security is bound to be affected in one of the main oil chokepoints, the Strait of Hormuz.
Latin American Rage
The election of right-wing presidents in Argentina (2015), Chile (2017), Ecuador (2017), Brazil (2018), and Colombia (2018) have proven to be a backlash against existing political establishments, rather than an endorsement of market reforms.
Our Assessment: Public anger will keep the risk of political instability-high across the region. Voter complaints of sluggish growth, corruption, and low-quality public services will cause unrest in coming elections.