Some of this year’s top global risks are inflation, “Rogue Russia” and Chinese President Xi Jinping, according to a political risk analysis consulting firm.
Eurasia Group, founded in 1998 and headquartered in New York City, has released its annual “top risks” report, which forecast of the political risks it predicts are most likely to play out over the course of the year.
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Last year’s report lists Russia, China’s zero-COVID policy, the U.S. Midterms, and a global power vacuum as the top risks of 2022.
Scroll below for the consulting firm’s top risks of 2023.
1. Rogue Russia
“A humiliated Russia will turn from global player into the world’s most dangerous rogue state,” wrote co-authors of the report, Eurasia Group President Ian Bremmer and Chairman Cliff Kupchan.
Moscow has been careful to keep its war confined to Ukraine since launching an invasion in February 2022. Bremmer and Kupchan predict that may change this year.
“In 2023, Putin can’t afford to be that cautious,” the report states. “Nuclear saber-rattling by Moscow will intensify. Putin’s threats will become more explicit; he’s likely to move tactical nuclear weapons closer to Ukraine — and publicize it — and we could see an increase in the alert status of Russia’s nuclear arsenal.”
2. Maximum Xi
“Xi Jinping emerged from China’s 20th Party Congress in October 2022 with a grip on power unrivaled since Mao Zedong,” wrote Bremmer and Kupchan.
Bremmer and Kupchan describe Chinese President Xi Jinping as “virtually unfettered in his ability to pursue his statist and nationalist policy agenda.”
With few checks and balances left to constrain him and no dissenting voices to challenge his views, Xi’s ability to make big mistakes is unrivaled, wrote Bremmer and Kupchan
“Arbitrary decisions, policy volatility, and elevated uncertainty will be endemic in Xi’s China,” the report states. “That’s a massive and underappreciated global challenge, given the unprecedented reality of a state capitalist dictatorship having such an outsized role in the global economy.”
“New technologies will be a gift to autocrats bent on undermining democracy abroad and stifling dissent at home,” predict Bremmer and Kupchan.
“Political actors will use AI breakthroughs to create low-cost armies of human-like bots tasked with elevating fringe candidates, peddling conspiracy theories and ‘fake news,’ stoking polarization, and exacerbating extremism and even violence — all of it amplified by social media’s echo chambers,” the report states.
“Rising interest rates and global recession will raise the risk of emerging-market crises,” wrote Bremmer and Kupchan.
“The nightmare scenario is a sudden stop in capital flows to emerging markets as we saw in the early 1980s, 1997, and 2008, prompted by a collapse in risk appetite that causes capital flight to the United States,” the report states. “These sorts of crises take much longer to happen than expected … and then happen very suddenly. The resulting currency depreciation would make it hard for countries to service their dollar-denominated debts and to afford imports of food, energy, and other necessities.”
“The chance of regime collapse is low, but it’s higher than at any point in the past four decades,” wrote Bremmer and Kupchan.
Three factors in Iran — domestic repression, nuclear advances, and involvement in the Ukraine war — increase the risk of confrontation between the Islamic Republic and the West, the report states.
“Energy consumers are breathing a sigh of relief now that the oil-supply shock expected after the Russian invasion of Ukraine failed to materialize and gas prices, especially in Europe, have fallen back from their 2022 highs,” wrote Bremmer and Kupchan.
The pair predict “a combination of geopolitics, economics, and production factors will create much tighter market conditions, especially in the second half of 2023.”
“That will raise costs for households and businesses, increase the fiscal burden on consumer economies, widen the rift between OPEC+ and major consumers, and create yet another source of increased tensions between the West and the developing world,” the report states.
Other risks listed in the report include arrested global development, the risk of political violence in the U.S., increased water scarcity, and the “Tik Tok Boom.” View the full report here.
Sound off: What do you think of this forecast for the new year? What political risks would you add? Share your thoughts in the comment section.