The importance of geopolitics

In the past few decades, political factors have had a short-lived impact on the world economy and policy. The rise in geopolitical tensions in recent years, however, suggest that this trend could be changing. In the years following the 2008-09 Global Financial Crisis (GFC), investors seemed less concerned with political dynamics and more focussed on economic performance, such that global policy mostly reflected economic conditions rather than political risk at the time. Recently, geopolitics has become a complex mix of events, exogenous factors, and thematic risks. This complexity poses a heightened risk to the global economy, potentially leading to more frequent geopolitical surprises in the coming decade. Geopolitical tensions, including the ongoing Russia-Ukraine war, the Israel-Hamas conflict, and the impact of climate change on food prices, are likely to remain on the radar for South Africa over the medium term, while general elections later this year also pose a threat to political stability.