Risk outlook: plenty to worry about beyond Covid

Managing risk in an increasingly bifurcated world in the midst and aftermath of the Covid-19 pandemic will continue to dominate the thoughts of risk managers. Divergent recovery speeds, differing policy responses, global supply-chain readjustments and ever-present political instability create an enormously challenging global business environment. Looking beyond that, there is a long tail of country risks, not directly related to—but many clearly exacerbated by—Covid-19 that businesses are going to have to understand to ensure that they can be managed.

The Economist Intelligence Unit’s core country growth forecasts are complemented by a comprehensive risk audit to provide a full understanding of both the opportunities and risks facing businesses.

We are forecasting global economic growth of 4.2% year on year in 2021, on the back of an anticipated 4.7% contraction in global output this year. Of course, this number masks enormous regional disparities. We are forecasting huge divergence in the speed of recovery for individual economies, based on multiple factors: fiscal space and commitment; monetary policy flexibility; sectoral composition; severity and timing of lockdown measures; export market exposure; and labour market dynamics and demographics. This divergence, straddling as it does already inflamed global trade tensions, cements our expectation of an increasingly bifurcated world.

Risks to our core country forecasts abound. Accelerated vaccine rollout and an unleashing of pentup demand could cause several countries to surge ahead on this chart. Conversely, in other countries the labour market may be severely diminished for an extended period, weighing on post-pandemic demand and creating recovery laggards.

As well as assessing risks related to the speed of recovery from the pandemic, our analysts monitor and quantify a wide range of country risk scenarios, assessing issues from credit access and tax reform to currency risk, border disputes and terrorism.

Our latest report includes a selection of risk scenarios, looking beyond those directly linked to the pandemic, that should be firmly on the radar of risk managers owing to the scale and intensity of the potential disruption that they could cause.

Read our report “Risk outlook: plenty to worry about beyond Covid” to find out more.