Although a recent World Bank report states that the global economy has become more resilient, for having defied last year’s terrible geopolitical tensions, the latter is still the most serious risk plaguing the world’s economy. The anticipated economic downturn did not take place last year as a result of the surging inflation, war outbreaks and the highest surge in interest rates, even if such factors slowed down the world’s economic growth.

Actually in WB’s “Global Economic Prospects” report, global growth in 2024 has been slowing down by 2.4% and is forecasted to go down further to 2.7% in 2025. The current trend all the more points to the past years as having the weakest economic growth ever recorded in the past 30 years.

While at the moment, another worldwide recession has been avoided, the World Bank warns that we are not out of the woods yet. As it is, the global economy is still facing risks posed by mounting geopolitical tensions in several countries across the world.

What Exactly are Geopolitical Tensions and What Risks Do They Pose to the Global Economy

The term geopolitics tensions refers to a broad aspect of international relations that can create adverse regional or global impacts that will heighten uncertain economic condutions. Tensions brought about by political instability, terrorist threats and military conflicts between nations are phenomenal events that retard global growth that could stoke global inflation.

Wars and armed conflicts would reduce global supply and at the same time increase the prices of major commodities like food and oil. At present, wars are raging in Eastern Europe between Russia and Ukraine; and in the Middle East between Israel and the Hamas in Palestine.

The war between Russia and Ukraine has impacted European businesses in terms of reduced exports and high energy prices that resulted in lower business profits. Cash flows have also been affected, but business loans are hard to come by since banks avoid heightening their financial risks.

Houthi missile attacks on ships plying the Red Sea have heightened conflicts in the Middle East where about 30% of the world’s oil supply is produced. The Red Sea missile attacks have disrupted shipping via the Suez Canal, which accounts for about thirty percent (30%) of container traffic on a global scale.