Pandemic-induced pressures have contributed to larger increases in global economic risk than ever before, according to the latest Political Risk Map from Marsh Specialty.
According to the report, strains on public financing in emerging markets will result from increases in sovereign indebtedness and may create unfavourable conditions for domestic and foreign-owned businesses.
Findings from this year's Political Risk Map mirror those in the World Economic Forum's Global Risks Report 2021, which reported that the COVID-19 pandemic is increasing disparities between emerging economies and industrialised nations. It is also driving social fragmentation which, in the next 5 to 10 years, will weaken geopolitical stability.
Social inequality is a pervasive risk across multiple regions – particularly in the Americas and Europe – and is likely to influence elections, contribute to political and economic nationalism, and could create conditions that spark open conflict. The study points to the risk of mass bankruptcies among zombie companies once government-backed support expires.
Stephen Kay, global head of political risks, Marsh Specialty, commented: “As the world recovers from the effects of COVID-19, we expect the issues of social inequality, country economic risk, and strategic resource nationalism to take centre stage in influencing political decision making.
Despite many areas of heightened risk, opportunities remain for corporate entities, financiers, and investors. Insurance-backed political risk and credit solutions can help to secure trade and investment capital, unlock liquidity, and enable growth that will fuel and sustain the recovery from COVID-19.”
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