The return of geopolitical risk: The economic effects of the war in Ukraine

The return of geopolitical risk: The economic effects of the war in Ukraine

Fecha: mayo 2022

José Ramón Díez Guijarro

Geopolitical risk

SEFO, Spanish and International Economic & Financial Outlook, V. 11 N.º 3 (May 2022)

The invasion of Ukraine by Russian forces implies a shift in the international paradigm impacting global geopolitical dynamics prevailing since the fall of the Berlin Wall. An event of such magnitude (a black swan in financial terminology) will not only have effects on the economic cycle in the short-term but may also alter the underlying trends that have defined the economy’s performance in recent decades. In the near-term, the increase in political risk will impact the economy via multiple channels, such as commodity prices, commercial ties, uncertainty and financial stability. At the same time, the return of policies articulated around blocks of geopolitical influence could imply a threat to the globalisation that has been intact since China joined the global production chain. Specifically, this may occur through triggering structural changes in the global economy, particularly on the supply side. Making this transition in Europe will require reconfiguring economic, foreign, defence and energy policy, potentially providing the longawaited impetus for European integration.

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