Economist Intelligence Unit Global Economy Report

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Prolonged stockmarket fall and global trade war are biggest threats to global economy, finds new EIU report

• The two top risks to the global economy are a prolonged fall in major stockmarkets that destabilises the global economy, and a trade war provoked by US protectionism.

• The next risks in terms of probability and impact are, in joint 3rd and 4th place, an outbreak of hostilities in the South China Sea as a result of territorial disputes, and a major cyber-attack crippling corporate and government activities.

• Other key risks identified include a disorderly and prolonged Chinese slowdown, a major military confrontation on the Korean peninsula, and outright conflict in the Middle East between Iran and Saudi Arabia.

A new report released today by The Economist Intelligence Unit identifies and assesses the top ten major risks to the global political and economic order. It finds that while the global economy has seen periods of high risk before, what is unique about this period are the risks associated with the US questioning its role in the world at the same time as China is becoming more assertive. But global risk is not just about the two biggest economies; risks also transcend boundaries on the political, military and financial spheres.

The report details how these various risks could morph into threats that destabilise large parts of the world. Each of the risks is not only outlined, but also rated in terms of its likelihood and its potential impact on the global economy. This enables distinction to be drawn between the so-called "black
swan" events of low probability and very high impact from those risks with a higher likelihood that need to be planned for in more detail.

Philip Walker, Risk Practice Director for The Economist Intelligence Unit, said: "There has arguably never been a period of such robust economic growth, low inflation and high employment that has been coupled with such a prevailing sense of unease with global conditions.

Policymakers, companies and populations are facing a wide range of major threats that could well upset the traditional global order in the coming years. It is important to assess and prepare for a likely tumultuous global environment in order not just to mitigate damage, but also take advantage of opportunities that will undoubtedly arise along the way."