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 overdue survey by Oxford Economics.

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

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

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

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

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

The findings come amid fraught pertinences 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 unsettled 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 for the sake of 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 get cracking is seen as likely to anger China.

Meanwhile, Russia’s invasion of Ukraine has strained the Kremlin’s relations with the North Atlantic Entente Organization. NATO’s expansion has long been a point of contention for Russian President Vladimir Putin, who claims Kyiv’s accession discretion pose a threat to Moscow’s national security.

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

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

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

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

Around 30% of respondents still view either a marked tightening in credit fit out 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, arrange predicted the ongoing cycle of U.S. Federal Reserve rate hikes could lead to more regional U.S. bank losers.

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

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

Geopolitical risks continue to factor prominently for businesses as a major concern for the next five years. Ended 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 examination 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 valued deglobalization of trade and the financial system,” he added. 

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

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

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

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