1. The outlook for short-term economic and political risk has become more varied around the world. While things are improving in the United States, United Kingdom, China and the Eurozone as these countries successfully manage COVID-19 and their vaccination programs, risk has increased in Brazil, India and other emerging markets where the number of coronavirus cases continue to surge.
2. Countries carrying high debt loads that are held beyond their borders continue to be vulnerable. As the outlook improves in developed countries, market sentiment and financing conditions are likely to tighten globally. A lag in widely distributing vaccines to emerging markets increases their risk to tightening global interest rates before their economies begin recovering.
3. The world’s least-developed economies are benefiting from official debt relief, but some emerging markets have been left out in the cold, despite facing similar liquidity pressures. While there hasn’t yet been a wave of defaults, sovereign credit quality in frontier markets continues to decline.
4. Political instability risks are rising as COVID-19 and associated lockdown measures are exacerbating underlying civic tensions in several global hotspots. While COVID-19 isn’t directly responsible for unrest, it has shone a spotlight on, and fuelled, pre-existing societal fissures.
5. The economic recovery is poised to be slow and uneven, with some sectors—agriculture, consumer goods, forestry and chemicals—expected to outperform others.
