Geopolitical risks are a top global threat to businesses, survey finds

Businesses
see
geopolitical
tensions
as
the
biggest
threat
to
the
global
economy
right
now,
according
to
the
latest
survey
by
Oxford
Economics.

The
finding
“confirms”
that
perceptions
of
economic
risks
have
shifted
significantly
for
businesses,
said
Jamie
Thompson,
head
of
macro
scenarios
and
author
of
the
survey.

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“Geopolitical
tensions
are
now
the
main
focus
of
concern,
both
in
the
near
term
and
the
medium
term,”
he
noted.

Around
36%
of
businesses
polled
view
geopolitical
tensions
as
top
risks
currently
—
such
as
those
related
to
issues
over
Taiwan,
South
Korea,
and
Russia-NATO.

In
contrast,
a
similar
survey
in
April
found
that
nearly
half
the
respondents
viewed
either
a
marked
tightening
in
credit
supply
or
a
full-blown
financial
crisis
as
the
top
risk
in
the
near
term.

The
latest
third
quarter
2023
Global
Risk
Survey
covered
127
businesses
from
July
6-27
this
year.

The
findings
come
amid
fraught
relations
between
Washington
and
Beijing,
as
bilateral
ties
hit
their
lowest
in
years. Tensions
escalated
after
the
U.S.
shot
down
a

suspected
Chinese
surveillance
balloon
which
flew
over
American
air
space.

Regarding
Taiwan,
China
has
insisted
the
issue
was
an
internal
affair
and
warned
the
U.S.
it’s
a

red
line
that
must
not
be
crossed.
Beijing
considers
the
democratically
self-ruled
island
part
of
its
territory.

Last
week,
the
Biden
administration
announced
a

weapons
aid
package
to
Taiwan
that’s
worth
up
to
$345
million,
according
to
Reuters.
The
move
is
seen
as
likely
to
anger
China.

Meanwhile,

Russia’s
invasion
of
Ukraine
has
strained
the
Kremlin’s
relations
with
the
North
Atlantic
Treaty
Organization.
NATO’s
expansion
has
long
been

a
point
of
contention
for
Russian
President
Vladimir
Putin,
who
claims
Kyiv’s
accession
would
pose
a
threat
to
Moscow’s
national
security.

While
businesses
continue
to
see
high
inflation
as
a
“significant
near-term
risk,”
they
appear
more
confident
that
the
problem
will
eventually
moderate,
noted
the
survey.

“Respondents’
expectation
for
world
consumer
price
inflation
stands
at
3.7%
in
2024,
0.2ppts
below
our
latest
baseline
forecast,”
said
Thompson.

“Expected
inflation
over
the
medium
term
has
fallen
significantly,
unwinding
the
rises
seen
over
the
past
two
years,”
he
added.

The
survey
also
highlighted
easing
concerns
over
banking
system
related
risks. But
the
issues
remain
elevated.

Around
30%
of
respondents
still
view
either
a
marked
tightening
in
credit
supply
or
a
full-blown
financial
crisis
as
among
the
top
risks
for
the
near
term
in
the
latest
survey.

Some
investors,
such
as
Kevin
O’Leary,
have
predicted
the
ongoing
cycle
of
U.S.
Federal
Reserve
rate
hikes
could
lead
to
more
regional
U.S.
bank
failures.

Regional
banks
such
as First
Republic, Silicon
Valley
Bank and Signature
Bank have
folded
since
March.

Those
institutions
were
destabilized
by
the
Fed’s
monetary
tightening
cycle
that
has
seen
11
rate
hikes
since
March
2022.

Geopolitical
risks
continue
to
factor
prominently
for
businesses
as
a
major
concern
for
the
next
five
years.
Over
60%
of
those
polled
see
it
as
a
“very
significant
risk”
to
the
world
economy.

“As
reported
last
quarter,
more
than
three-fifths
of
respondents
view
geopolitical
risks
as
a
very
significant
risk
to
the
global
economy
over
the
medium
term,”
said
Thompson.

“An
intensification
of
geopolitical
tensions
could
potentially
trigger
significant
deglobalization
of
trade
and
the
financial
system,”
he
added. 

Deglobalization
is
the
third
most
cited
risk
in
the
latest
survey,
viewed
as
“a
very
significant
risk”
by
23%
of
respondents.

Around
25%
view
early
policy
rate
cuts
as
among
the
top
upside
risks.
On
China,
businesses
see
“less
chance
of
a
China-driven
upturn.”

China’s
reopening
as
the
top
global
upside
has
almost
halved
over
the
past
three
months,
down
10%
in
the
latest
survey
compared
with
19%
in
April.

The

International
Monetary
Fund
recently
noted
China’s
post-Covid
economic
recovery
was
losing
steam
and
taking
a
toll
on
the
world
economy.

“Continued
weakness
in
the
[Chinese]
real
estate
sector
is
weighing
on
investment,
foreign
demand
remains
weak,
and
rising
and
elevated
youth
unemployment,
at
20.8%
in
May
2023,
indicates
labor
market
weakness,”
the
IMF
said
in
a
report.