1. The aftermath of the COVID-19 pandemic and Russia’s invasion of Ukraine have created a cocktail of debt hangovers, surging commodity prices, record inflation and rising interest rates—not to mention, an outlook of slowing economic growth and protracted geopolitical tensions. These threats are raising macroeconomic and political volatility, and ultimately, country risk.
2. A key risk is the global spread of political violence. Countries near the geopolitical battlegrounds of Eastern Europe and East Asia are experiencing rising tensions and external threats. At the same time, grievances and protests stemming from high inflation and rising income inequality are driving social unrest.
3. Sustained elevated commodity prices, like food and fuel, are being felt across the world. Major commodity exporters such as the Gulf states are reaping significant economic and financial benefits, while importers are facing higher import bills and the costs of containing inflationary pressures. This is causing some countries to draw down their foreign exchange reserves or even limit non-essential imports.