Growing geopolitical risk jars global economy

THE 1920s are widely known as the “roaring 20s” of economic prosperity before the Great Depression. However, the 2020s increasingly risk becoming a “warring 20s”, not least with the recent, growing tensions in the Middle East.

The context for these growing geopolitical tensions is a recent forecast by the World Bank that, by 2027, global gross domestic product growth may average just 2.5 per cent in the 2020s. This is the slowest pace of any decade since the 1960s.

While the current Middle Eastern tension dates back to at least the Hamas terror attacks of 2022, they have escalated significantly this month with the Israeli attacks on Iran, and countermoves in retaliation from Teheran. The significant downside risks that the conflict could grow may be under-priced by some financial market participants.