Normalising Uncertainty

Country Risk Analysis | Geopolitical Analysis | Investment Strategy & Intelligence | Risk And Compliance


By Dr. Judith Jacob
Director of Geopolitical Intelligence

With the world leaving behind the worst of the coronavirus pandemic and with inflation rates falling, there is cautious optimism that 2024 will be less volatile than the last few years. Nevertheless, many governments and institutions have not articulated a clear path forward to tackle major domestic and global issues, choosing instead to bide their time as numerous elections play out and conflicts fester. This lack of leadership and unclear trajectory creates uncertainty for businesses and increases the likelihood that systems and alliances that underpinned the post-war political order will continue to unravel.

Key Risks

1. The Elections That Matter

With over 60 countries and roughly 40% of the global population going to the polls this year, much has been written over the apparent decline in the quality of democratic institutions, the use of repressive tactics by incumbents, and the geopolitical and economic impact of these votes. Some of these concerns are valid, but in many cases the outcome of these elections is fairly certain (India, Russia) or unlikely to result in substantive policy change (Indonesia, Mexico, UK).

Conversely, the two polls that will yield results of significant geopolitical consequence will be the European Parliament election (6-9 June) and the US presidential vote (5 November). Electoral success for far-right EU parties and for Donald Trump will undoubtedly lower Western support for Ukraine’s efforts to sustain its defence against Russia. A Trump victory in particular would see the likely weakening of US-led security infrastructure through further threats to withdraw from NATO, the imposition of more tariffs on trade from allies and foes alike, and a rollback of environmental commitments domestically and internationally.

2. Maritime Shipping Vulnerabilities

The ongoing diversion of commercial vessels around the Cape of Good Hope following Houthi rebel attacks in the Red Sea underscores the vulnerabilities of global maritime supply chains. While the attacks – and retaliatory efforts by the US and its allies – will not halt shipping entirely, they will cause delays and raise the costs of fuel and deliveries, with the impact being felt at least throughout the first half of 2024.

Even in the unlikely event that the situation in the Red Sea is resolved quickly, maritime trade remains vulnerable to diversions and closures in other areas. Low levels of rainfall exacerbated by the El Niño phenomenon and climate change will continue to slow the passage of ships through the Panama Canal for at least the next six months, if not longer. The congestion at the waterway will again raise freight costs as operators charge more due to wait times or opt to use longer routes.

In addition to these issues, China’s assertive naval manoeuvres in the South China Sea also raises the likelihood of diversions for commercial vessels in these waters. Frequent skirmishes and standoffs between the Chinese and other regional navies, like the Philippines, will probably result in sporadic operational disruption to commercial shipping. Vessels are forced to reroute from contested areas or obstructions by naval patrols, aircraft carrier deployments, and military exercises by China or US and its allies.

3. US-China Competition & Technology Regulation

Led by the United States, we expect there to be further restrictions placed by Western nations on China’s technology sector – specifically the expansion of export controls and regulations to include areas like quantum computing, satellites, bioengineering, as well as further curbs on equipment related to the creation of high-end semiconductors and chips used for training artificial intelligence (AI) models. These efforts will hamper longer term Chinese technology advancements, particularly its national security and defence capabilities.

For its part, China will likely introduce further incentives and stimulus packages for local firms to increase production to continue its bid for self-sufficiency in these areas. Additionally, it will probably enact some light restrictions on key rare earth minerals, slowing renewable technology and defence production in the West.

Collectively, the measures and ongoing US-China competition are likely to benefit a host of South and Southeast Asian countries, like India, Malaysia, and Vietnam as companies invest in alternative sources of supplies to reduce their dependence on Chinese manufacturing.

4. Climate Extremes Diminishing Infrastructure Resilience

With 2024 likely to be even warmer than 2023 – already the hottest year on record – extreme weather events like wildfires, heatwaves, droughts, and flooding will almost certainly occur with greater frequency and intensity. These impacts of climate change are well documented but in 2024, we forecast that years of these extreme climate events are highly likely to take an even greater toll on infrastructure, particularly in less developed economies.

Protracted droughts will undoubtedly hamper electricity supply – largely driven by hydropower – and food production in East and Southern African countries. Additionally, widespread wildfires in Canada and southern European nations will cause widespread destruction of buildings, roads, and crops, among other issues.

These increasingly frequent events – compounded by a lack of state capacity to respond in many cases – will see disruptions to supply chains, increasing production and food costs, and thus raising the likelihood of anti-government demonstrations and intercommunal competition for limited resources. Climate activists are also likely to continue to employ creative and disruptive strategies to stymie operations of firms believed to be directly causing or at least profiting from these climate extremes.

5. Export Controls & Economic Security

The outbreak of conflict in Ukraine, increasing US-China competition, and the global coronavirus pandemic have been big events driving concerns in governments about the need to maintain higher levels of self-sufficiency. We believe that states are highly likely to maintain this outlook in 2024, thus adopting stronger policies to achieve economic security.

We are thus likely to see governments like Peru and Indonesia enact further export control measures on minerals. Others like Vietnam and Thailand will threaten to limit sales of key food commodities, such as rice, to gain advantage in trade negotiations or disputes with neighbouring states.

Likewise, it is probable that more nations will deem more sectors critical to their economies as strategic. This will result in the enactment of a range of measures including exerting informal pressure to discourage foreign ownership, the introduction of greater legal regulations, and the promulgation of industrial policies and stimulus packages to prop up domestic industry.