Impact of Global Economic Changes

Reflecting on a busy and eventful 2024, I wanted to share my key takeaways from this year’s engagements and speeches. 𝟭. 𝗠𝗮𝗻𝗮𝗴𝗶𝗻𝗴 𝗚𝗹𝗼𝗯𝗮𝗹 𝗣𝘂𝗯𝗹𝗶𝗰 𝗗𝗲𝗯𝘁 𝗟𝗲𝘃𝗲𝗹𝘀 Global public debt has grown sizably over the last few years and is projected to approach 100% of GDP by the end of this decade. We need a strategic pivot in global fiscal policy – ensuring that governments will have the resources needed to invest in structural transformations, including climate change, and to fight the next crisis. Countries need a strategy that focuses on growth, that has effective guardrails to ensure compliance, and that builds in close engagement with all stakeholders including civil society to have the greatest chance at success. More here: https://lnkd.in/gw3uswMS   𝟮. 𝗡𝗮𝘃𝗶𝗴𝗮𝘁𝗶𝗻𝗴 𝗙𝗿𝗮𝗴𝗺𝗲𝗻𝘁𝗮𝘁𝗶𝗼𝗻, 𝗖𝗼𝗻𝗳𝗹𝗶𝗰𝘁, 𝗮𝗻𝗱 𝗟𝗮𝗿𝗴𝗲 𝗦𝗵𝗼𝗰𝗸𝘀 Russia’s invasion of Ukraine has had a profound impact. This conflict not only affected Ukraine and its neighbors but also reshaped the global economy. Increased fragmentation and higher defense spending are now realities we must navigate. Central banks need to adapt their strategies, and coordinated fiscal, financial, and structural policies are crucial to maintain macroeconomic stability in this more shock-prone environment. More here: https://lnkd.in/gm4yUHhq 𝟯. 𝗚𝗲𝗼𝗽𝗼𝗹𝗶𝘁𝗶𝗰𝘀 𝗮𝗻𝗱 𝗶𝘁𝘀 𝗜𝗺𝗽𝗮𝗰𝘁 𝗼𝗻 𝗚𝗹𝗼𝗯𝗮𝗹 𝗧𝗿𝗮𝗱𝗲 𝗮𝗻𝗱 𝘁𝗵𝗲 𝗗𝗼𝗹𝗹𝗮𝗿 The pandemic and geopolitical tensions have led countries to reassess their trading partners and economic strategies. There's a noticeable shift in foreign direct investment flows along geopolitical lines. These changes underscore the dynamic nature of global trade and the need for adaptable economic policies. More here: https://lnkd.in/g9cbVUjQ 𝟰. 𝗖𝗿𝗶𝘀𝗶𝘀 𝗔𝗺𝗽𝗹𝗶𝗳𝗶𝗲𝗿? 𝗛𝗼𝘄 𝘁𝗼 𝗣𝗿𝗲𝘃𝗲𝗻𝘁 𝗔𝗜 𝗳𝗿𝗼𝗺 𝗪𝗼𝗿𝘀𝗲𝗻𝗶𝗻𝗴 𝘁𝗵𝗲 𝗡𝗲𝘅𝘁 𝗘𝗰𝗼𝗻𝗼𝗺𝗶𝗰 𝗗𝗼𝘄𝗻𝘁𝘂𝗿𝗻 While AI can drive efficiency, it can also pose risks, especially during economic downturns. In the next downturn, AI could threaten a wider range of jobs than in past cycles. AI systems, trained on past data, may struggle with novel events, potentially exacerbating financial instability. To mitigate these risks, we must ensure tax systems do not favor automation over people, support workers affected by AI, and adopt measures to reduce financial and supply-chain amplification risks. More here: https://lnkd.in/gnM-XZtC   As we move into 2025, these challenges will remain top of mind as we work to foster a more resilient global economy. Wishing you all a prosperous and impactful new year!

We’re only human Measures of economic policy uncertainty have eclipsed the pandemic. The largest increases are due to trade policy uncertainty and where the US will end up with regard to tariffs. Why do we care? A top 10 list 1. A “wait and see” mentality emerges. Large, hard to reverse spending decisions by firms and households are put on hold. That acts as a drag or tax on economic activity. 2. Business investment feels the bulk of the effects and contracts. 3. Credit conditions tighten, especially for those most exposed to tariffs, which further constrains investment. Even firms with plans to invest can be hobbled. 4. The banking system becomes less stable. Loan defaults pick up as the economy slows. Consumer delinquencies are already on the rise. 5. Unemployment rises as growth slips to levels that no longer enable the economy to absorb those entering the labor force. What is unknown is whether that weakness will cause a further slowdown in wage growth given the stagflationary effects tariffs. Workers tend to demand compensation for the escalation in the cost of living due to tariffs. 6. Consumer spending skips a beat. Job losses confirm fears and and trigger a larger blow to aggregate incomes and spending. 7. Financial market volatility soars and asset prices fall. People lose retirement savings and feel poorer, companies can't raise money by selling stock and loan losses accelerate. Confidence among consumers and busineses further falters. 8. Monetary policy becomes less effective as fear prevents firms and consumers from reacting to stimulus once it starts. 9. Contagion. Foreign firms and governments perceive the US as an unreliable and less predictable partner. Supply chains are reconfigured to reduce their dependence on US markets. 10. If left unchecked, sustained periods of uncertainty can trigger a breakdown of economic and political systems. Five things can help mitigate and derail bouts of uncertainty from becoming a vicious global cycle: 1. Strong institutions. They create confidence that rules won’t arbitrarily change, and work to counter the “wait and see” behaviors that curb growth. The judiciary plays a key role. 2. Clear communications by the Fed. That and a lack of political interference tempers uncertainty regarding the trajectory of inflation. 3. Automatic fiscal stabilizers, which provide immediate, predictable government response without political gridlock that can worsen a crisis. 4. Well capitalized banks, which prevent larger credit crunches from taking root. 5. International cooperation, which limits contagion. Bottom line Bouts of uncertainty trigger fight or flight reactions. That has resulted in a toxic mix of panic and paralysis. Expect whiplash, as the surge in activity ahead of tariffs borrows from growth later in the year. As for national security, that could be shored up with a targeted & strategic approach to industrial policy. Break bread not ties when possible. Be kind; pay it forward.

Phone calls have been buzzing. Laptops are glowing. Excel sheets are flying. This wasn’t a typical weekend for the C-suite. Across sectors, CEOs, CFOs, and CIOs have been on back-to-back calls, recalibrating their strategies as they enter what is one of the most significant policy shifts in modern geo-economic history. 💼 Emergency executive teams have been formed. 📈 Scenario models are multiplying. 🌐 Global subsidiaries are under the microscope. We are navigating a complex web of policy shifts—and these are not marginal adjustments. As leaders, we’re being pushed to ask questions that, until recently, seemed unfathomable: What happens to pricing in an era of shifting tariff and tax regimes and fractured supply lines? How will demand evolve as economies rebalance and national interests take center stage? Most critically, how resilient and responsive are our supply chains in a world where geopolitics now shapes logistics? This goes far beyond how we report earnings, manage compliance or mitigate risk. It’s a transformation in how the global economy functions—and we must treat it as such. Sector by Sector: What’s Being Redefined 🔸 Consumer Brands Witnessing a reevaluation of inventory strategies. Pricing models need to become more agile. Loyalty programs and e-commerce ecosystems are being re-modeled. 🔹 Manufacturing Supply chains are under pressure—this time from trade sensitivity - Transfer pricing and subsidiary-level planning are evolving fast. “Smart factories” in the US being evaluated are being looked into 🔸 Technology The location of R&D hubs and IP ownership is no longer just an efficiency play—it’s a governance priority. Technology Teams are developing new offerings with the highest return and lowest cost. 🔹 Investments & Funds Portfolio managers are engaged in intensive scenario planning as asset prices fluctuate rapidly on a daily basis. Asset managers have been the busiest lot! Research houses are backlogged. In moments like these, the role of leadership is clear: We must look ahead—not just at what’s changing but at what will be demanded of us in the next chapter. Are we prepared to act, restructure, and lead at the pace this new environment demands? The rules of the game are being Rewritten. Strategically. Permanently. C-suites are planning in layers—playing both defense and offense. Many businesses are stockpiling optionality. Some are building inventories. The savviest? Building entire alternate operating structures. What Few Are Saying Loudly—But Everyone's Acting On: 🔹 Investment houses are recalibrating long-term models 🔹 Export-heavy industries are rethinking FX and interest rate exposure 🔹 Defense, infrastructure, and energy assets are being repriced 🔹 The idea of “neutral geographies” is being redrawn in real time This isn’t just policy. It’s the geoeconomic restructuring of our time.

The recent movements in global markets, particularly the weakening of the US Dollar, are sending ripples across the economic landscape. For Silicon Valley founders and VCs, this has tangible implications for your runway, international reach, and investment strategies. For Founders: A weaker dollar makes your US-made software and services more affordable for international customers. This could be a significant tailwind for growth in overseas markets, boosting foreign revenue when converted back to USD. Are you positioned to capitalize on this? Hiring top talent internationally might become more difficult, as dollar-denominated salaries, lower purchasing power, and political/immigration uncertainty may become less attractive to foreigners. For those with significant operations or hires already based abroad, costs might increase when translated to back to USD. For VCs: LP commitments from abroad might see their local currency contributions go further, potentially encouraging more international LP interest in US funds. Time to look across the pond to potential future LPs! Portfolio companies with substantial international revenue, a weaker dollar could positively impact their top line when reported in USD, potentially boosting valuations. Conversely, companies with significant foreign expenditures may face margin pressure. If you have LPs based outside the US, a weaker dollar means their initial capital calls (in USD) effectively cost less in their local currency, potentially making future capital calls easier to manage. Does this shift encourage more direct investment into non-US markets, or does it reinforce the attractiveness of US-based companies with strong international sales? How does a weakening dollar affect the attractiveness of US-based startups to international acquirers? What are your observations on the ground? How are you adjusting strategies in response to these currency shifts? Share your insights below! (Chart depicts Year-To-Date USD/GBP) #SiliconValley #VentureCapital #StartupFunding #Macroeconomics #DollarStrength #Founders #GPs #GlobalEconomy

Actuaries are now warning of a looming financial catastrophe, projecting a potential 50% collapse in global GDP within the coming decades due to unchecked climate change. While climate scientists have long predicted environmental consequences, this latest report from the Institute and Faculty of Actuaries (IFoA) and the University of Exeter signals an impending economic crisis that mainstream financial institutions seem unprepared to address. The Economic Risks of Climate Change The IFoA report estimates that if global temperatures continue to rise without significant intervention, global GDP could shrink by half between 2070 and 2090. This forecast is not speculation—it is based on rigorous financial risk assessments, the same models that determine insurance premiums, pension fund stability, and investment allocations. The projected impact is far beyond a typical recession; it would mark a structural collapse of key industries, making insurance unaffordable, pensions unsustainable, and economic security uncertain. Why Isn’t the Economic Community Responding? Despite these dire warnings, mainstream economic forecasts continue to assume “business as usual.” Many financial institutions and policymakers remain focused on short-term growth and quarterly returns, underestimating the long-term risks of climate-driven economic shocks. The insurance sector, in particular, could face unsustainable losses as extreme weather events become more frequent and destructive. A Call to Action If actuaries—the professionals responsible for assessing financial risk with precision—are issuing this warning, governments and businesses can no longer afford to ignore it. The report suggests that urgent action is needed to mitigate climate risk through aggressive policy changes, sustainable investment strategies, and adaptation measures to protect financial systems from collapse. As the effects of climate change intensify, those who plan for the future must shift their mindset from short-term profits to long-term resilience. The financial reckoning predicted by actuaries may not be immediate, but its consequences could define the global economy for the rest of the century.

We can expect inflation and tariffs to drive bigger forecast misses in 2025. Financial models should capture the impact of both. Here's how: 𝗖𝗼𝘀𝘁 𝗼𝗳 𝗚𝗼𝗼𝗱𝘀 𝗦𝗼𝗹𝗱 (𝗖𝗢𝗚𝗦) 𝗮𝗻𝗱 𝗜𝗻𝘃𝗲𝗻𝘁𝗼𝗿𝘆 The most obvious negative impact of inflation and tariffs is on the cost of imported goods or raw materials. While inflation drives the cost up over time, tariffs artificially inflate the cost of goods through what's essentially an import tax. Higher input costs from inflation and tariffs also increase the carrying cost of inventory. How can a financial analyst capture the impact appropriately? - Break out material costs into domestic and imported components. - Apply the inflation rates to both and apply the impact of tariffs to the imports. 𝗦𝗮𝗹𝗲𝘀 𝗥𝗲𝘃𝗲𝗻𝘂𝗲 If you think that tariffs will only penalize foreign businesses, think again. Higher input costs may force companies to raise rates, potentially impacting the price consumers pay. It may also have a profound impact on the supply and demand. It won't be a matter of consumers choosing domestic goods over foreign goods. It might be a permanent reduction in goods produced. How can a financial analyst capture the impact appropriately? - Don't just forecast sales in total. Make it the product of volume and price, allowing for each to be modeled independent of the other. - Consider contingency scenarios, which can be activated based upon customer responses and the implications on revenue targets. 𝗢𝗽𝗲𝗿𝗮𝘁𝗶𝗻𝗴 𝗘𝘅𝗽𝗲𝗻𝘀𝗲𝘀 Inflation and tariffs can increase operating costs across most categories. This includes wages, utilities, and logistics among others. Financial planning & analysis professionals may need to aid in the restructuring of operations depending on the outcomes of their forecast models. How can a financial analyst capture the impact appropriately? - Include an inflation escalation factor for key operating expenses. - Separate tariff-related costs from inflation for greater visibility and influence. Inflation and tariffs in 2025 will have major disruptions on a global scale. Forecasting failure comes from a lack of consideration about future realities. Operational failure comes from a lack of imagination around how to deal with them. #BigIdeas2025

Is Protectionism Reshaping the Global Economic System? Global trade is undergoing a fundamental shift due to the rising wave of economic protectionism, ignited by former U.S. President Donald Trump’s broad tariff policies. According to The Wall Street Journal, these policies evoke memories of the economic isolation of the 1930s, which contributed to the Great Depression. But how do leading economists view this trend? 📌 Larry Elliott (The Guardian): "Trump sees his trade war as a show of strength, but it’s quite the opposite." 📌 Joseph Stiglitz: "Trump’s trade policies have made the U.S. a frightening place for investment and increased the risk of stagflation," a situation where inflation remains high while economic growth slows. 📌 Steven Greenhouse (The Guardian): "Trump’s obsession with tariffs is a losing proposition." These policies have not only raised prices but also hurt economic growth and negatively impacted U.S. industries, suggesting they could backfire. Alarming Figures: 📊 4,650 import restrictions among G20 countries (a 75% increase since Trump took office). 📊 Global growth softens across major economies: Global GDP is expected to decline from 3.2% in 2024 to 3.0% in 2026, with U.S. growth cooling to 1.6% by 2026 and China slowing to 4.4%. ⚠️ Economic Risks: ✔ Rising Inflation – Tariffs make imports more expensive, driving up prices. ✔ Weaker Economic Growth – Trade restrictions reduce efficiency and productivity. ✔ Eroding International Relations – Protectionism could lead to prolonged trade wars. In my opinion: Tariffs can be beneficial in the short term, but their risks are significant in the long term. Do you think we are witnessing a long-term shift toward economic isolation, or is this just a temporary trend that will soon fade? Sources: in the comments #GlobalTrade #Protectionism #Tariffs #SupplyChain #Inflation

How will commodity markets evolve amid today’s extraordinary uncertainty? Our latest Commodity Markets Outlook offers some early answers. Here are a few highlights: 🔻 Commodity prices are projected to fall 12% in 2025, with more than half of all commodities declining—many by over 10%. By 2026, prices are expected to reach a six-year low. 🛢️ Oil will play a major role: Brent crude is forecast to average $64 in 2025 and $60 in 2026, as demand slows and supply expands. 📉 Risks are tilted to the downside. A sharper-than-expected global slowdown or increased oil output from OPEC+ could push prices even lower. In one downside scenario, Brent could fall to $59 and copper prices could drop 19% next year. ⚠️ Upside risks remain: Geopolitical flare-ups or extreme weather could disrupt supply and trigger price spikes—especially for food and energy. 📉 Inflation impact: Falling commodity prices are expected to reduce global inflation by 0.35 percentage points in 2025. In a severe downturn, energy prices could knock off 0.5 percentage points—similar to 2020. 🌍 These developments extend a tumultuous decade in commodity markets, marked by the highest price volatility in at least 50 years. This issue features a Special Focus piece analyzing the features of commodity cycles since 1970. 👉 For the full analysis, check out the Commodity Markets Outlook (see the link below) #economics #trade #worldbankgroup #developingcountries #econdev #economies #emergingmarkets #globaleconomy #worldbank #monetarypolicy #commodities #gold #commodityprices #oil #inflation #metals #silver #emergingmarketsfixedincome #monetarypolicy European Central Bank Bank for International Settlements – BIS Central Bank Research Association (CEBRA) Federal Reserve Bank of New York Federal Reserve Board The World Bank The World Bank Group IFC - International Finance Corporation International and Monetary Economics Network International Monetary Fund The World Bank Treasury (IBRD • IDA) Center for Global Development The Brookings Institution UN Trade and Development (UNCTAD) UNDP COMMODITY TRADING CLUB Commodity Trading News Commodity Insights S&P Global Commodity Insights Joe Rebello David Young Kristen Milhollin John Baffes Dawit Mekonnen Jeetendra Khadan Kaltrina Temaj Phil Kenworthy, CFA Carlos Arteta Paolo Agnolucci Mirco Balatti, PhD https://lnkd.in/eifgtWqH

Quoting the post from Professor Andreas Rasche below: “Brand new research published in 'Nature' paints a bleak picture for the world economy. According to the study, the global economy is set to experience a 19% reduction in income within the next 26 years, regardless of future emission choices. The research analyzed climate impacts on economic growth in over 1,600 subnational regions over the past 40 years, offering a more granular picture of the situation. Shockingly, the estimated macroeconomic climate damages are six times larger than the costs needed to limit warming to 2C. Moreover, the study highlights that the countries least responsible for climate change will suffer the most. Unfortunately, the economic costs of climate change will be significant for the U.S. and Europe. Global annual damages are projected to reach $38 trillion by 2049 if we continue down this path” As a society, we need to take immediate action to mitigate the impact of climate change. The consequences will be irreversible if we do not act now. Check out the full study here: https://lnkd.in/dTg9xaPv. #climatechange cc: Prof. Wayne Visser Matt Gitsham Jonatan Pinkse Dr. Giorgos Dimitriou

Global growth is expected to weaken to 2.3% in 2025, marking the slowest rate since 2008. Increased trade frictions, policy uncertainty, and a higher incidence of extreme climate events are confronting the world—and particularly developing countries—with significant challenges, limiting their ability to reduce extreme poverty. The latest The World Bank Global Economic Prospects for 2025 outlines three priorities to support these countries: rebuild trade relations, restore fiscal order, and accelerate job creation. By offering global and regional outlooks, this report led by Dana Vorisek provides a clearer understanding of the pressures facing developing economies and the policy options available to address them. 🔗 https://lnkd.in/e3aP_MBT #GEP2025