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A US stockmarket crash and widespread social unrest are the two most likely threat scenarios to happen in 2022, significant events which could derail world security and melt down economies, a new report has predicted.
However, the rebound will mask great variations in the pace of recovery across different regions, the report said.
These 10 threats could jeopardise global security next year.
1. Worsening US-China ties force full decoupling in global economy
Probability: High
Impact: Very high
The world’s two biggest superpowers, the US and China, are vying for global influence and dominance.
“US president Joe Biden, is trying to convince ‘like-minded’ (mostly Western) countries to collaboratively put pressure on China,” the report said, including restrictions in the areas of trade, technology, finance and investment, along with sanctions, forcing some markets and companies to choose sides.
The report warns this could lead to a “neutral stance becoming economically prohibitive” for third countries, dividing China-supporting and US-supporting economies.
The fallout could heighten uncertainty in global trade and investment.
2. Unexpectedly fast monetary tightening leads to US stock market crash
Probability: Very high
Impact: High
Supply-chain disruptions, higher energy prices, ultra-loose monetary policy all contributed to a sharp uptick in US inflation in 2021, the report said.
This could force the Federal Reserve to start tightening monetary policy, which in turn could lead to a rise in interest rates by mid-2022.
“Accelerated interest-rate increases could be enough to initiate a sharp stockmarket adjustment,” the report warned.
3. Property crash in China leads to sharp economic slowdown
Probability: High
Impact: Very high
Many of China’s real estate firms are similarly overleveraged, the report said.
If worsening real estate sentiment leads to a string of defaults across China’s real estate sector, Beijing could struggle to contain a broader meltdown.
4. Tighter domestic and global financial conditions derail recovery in emerging markets
Probability: High
Impact: High
The economies of emerging nations are vulnerable to inflationary pressures because of rebounding commodity prices.
“Risks will be especially elevated in countries where indebtedness in foreign currency is particularly high,” the report said, such as Argentina and Turkey.
Brazil, Mexico, Russia, Sri Lanka and Ukraine have all raised monetary policy rates in 2021.
5. New COVID-19 variants emerge that prove resistant to vaccines
Probability: Moderate
Impact: Very high
“One of the main risks for the global recovery is that new, more aggressive Covid-19 variants prove resistant to current vaccines,” the report said.
The report warned of a “perpetual cycle” of booster shots and new vaccines, pointing to no effective vaccines having been developed for HIV/AIDS, despite massive investment and effort.
6. Widespread social unrest weighs on the global recovery
Probability: Very high
Impact: Low
The report warns “a spike in unrest is possible” in 2022 because of the negative effect of the pandemic on incomes and quality of life.
“Traditionally stable” Western states and long-standing authoritarian regimes were both considered vulnerable, with the Middle East, Africa and Latin America most at risk.
Significant unrest can lead to a government collapse, panicking investors and destabilising economies.
7. Conflict erupts between China and Taiwan, forcing US to intervene
Probability: Low
Impact: Very high
Increasing tensions between China and Taiwan has “raised the risk” of a military conflict in the Taiwan Strait.
“We expect China to refrain from purposefully initiating direct conflict with Taiwan, owing to concerns about US involvement,” the report said, adding that Taiwan’s president has rejected declaring independence as an explicit policy goal.
A conflict would wipe out Taiwan’s economy and “risk drawing in” the US, Australia and Japan.
8. EU-China ties worsen significantly
Probability: Moderate
Impact: Moderate
EU-China relations have slumped since the EU imposed sanctions against China over human rights abuses in Xinjiang.
Ongoing, intensifying sanctions will hurt EU and Chinese companies, the report stated, with implications for the wider global economy.
9. Severe droughts prompt a famine
Probability: Low
Impact: Moderate
Droughts are expected to become more frequent.
“Water shortages in southern Europe, the Mediterranean, the south-western US and southern Africa—the breadbaskets of the world—would have short- and long-term consequences for the global economy,” the report said.
Multiple crop failures will drive up global commodity prices, with impacts on global inflation.
The report pointed to intense heatwaves in Canada and the US this year, and bushfires striking Greece, Turkey and Spain.
10. Inter-state cyberwar cripples state infrastructure in major economies
Probability: Moderate
Impact: Low
Expect an uptick in cyber-attacks, the report warned.
Attacks on critical infrastructure, such as food and energy supply lines, or knocking out a national power grid, destabalises national economies, with potential global impact.
“Tit-for-tat cyber-attacks” will become commonplace, with geopolitical competition continuing to “heat up” in the coming years.
Source: 9News
