Resilience or Retreat? How Economies Are Battling Uncertainty in a Geopolitical Storm

As the world grapples with rising geopolitical tensions, economic resilience is now the mantra for policymakers, firms, and investors alike. Emerging global forums and reports underscore how protectionism, trade wars, and regional conflicts are redefining growth opportunities and necessitating timely new strategies.

 

Highlights:

 

World Economic Growth Slows, Uncertainty Peaks: Global economic growth will slow to 2.3% in 2025, falling below the level usually signaling recession. The Economic Policy Uncertainty Index reached its highest point this century, and financial markets have seen precipitous corrections, with volatility at levels comparable to the COVID-19 and 2008 crises. Developing economies are particularly susceptible to shocks from muted demand and trade policy disturbance.

 

Trade Friction and Fragmentation: Re-emergence of aggressive tariffs, especially between China and the US, has the potential to fragment supply chains globally and fuel inflation. Though tariffs can revive domestic sectors, most experts caution against irreversible damage to consumers and ongoing market turmoil. China will likely retaliate using fiscal measures and greater regional integration.

 

Strategic Autonomy and Supply Chain Rebalancing: Governments and industry are making economic security a priority, particularly in strategic sectors such as energy and technology. There is a strong emphasis on "friend-shoring," diversification, and regionalization to decrease dependence on external shocks. European leaders are weighing collective defense investment, and Asian economies are accelerating intra-regional trade and digital enablers.

 

Policy Priorities for Resilience: Specialists call for flexible monetary and fiscal policies, deeper social safety nets, and speeded-up digitalization. Domestic demand and structural reforms are prioritized in Asia, while multinational businesses are creating "geopolitical muscle" to prepare for shocks and respond to supply chain adjustments.

 

In today's volatility, resilience is not a policy option-it's a survival and growth imperative.

 

Sources: UBS, IMF, World Economic Forum, UNCTAD