Top 5 risks to the global economy

Top five risks to the global economy in 2020

The growth outlook for 2020 appears bleak. Renewed geopolitical uncertainty, coupled with the emergence of a coronavirus in China, will limit any pick-up in confidence and investment. Meanwhile, the social unrest seen across the world in 2019 looks set to continue in 2020, challenging both policymakers and business models. Growth is supported by continued ultra-loose monetary policy among the world’s major central banks. However, ultra-loose monetary policy also represents a risk, as it may trigger new debt crises in emerging markets. Most importantly, the trade truce between the US and China remains fragile, and a flare-up in tensions between the world’s two economic superpowers cannot be excluded.

The EIU’s Top five risks to the global economy in 2020 report presents five scenarios on the impact that rising geopolitical uncertainty and a slowdown in economic growth can have on the global economy in 2020.

“The risk of an unintended slide into an escalating military conflict between the US and Iran cannot be ruled out. A direct conventional war would have devastating consequences for the global economy. In this scenario there is a distinct possibility that the Strait of Hormuz (through which about 20% of global oil supplies transit) could be closed.


EU-US trade tensions will also rise this year, as the recent completion of a first-phase US-China trade deal causes the US’s attention to shift back to the EU’s trade surplus with the US, and the EU’s position becomes more assertive with a new Commission in place. A further escalation in tariffs involving the US and EU auto industries cannot be ruled out.


Finally, the global economic impact of the coronavirus outbreak is set to be more profound than that of severe acute respiratory syndrome (SARS), owing to the much larger role that China plays in the global economy today. Disruption of international trade will become entrenched as supply chains are diverted from China. US-China trade tensions are more likely to re-escalate, particularly if China proves unwilling or unable to deliver the import commitments agreed under the recent first-phase limited trade deal. A growing number of international exporters might experience financial distress, as a persistent shortfall in Chinese demand depresses commodity prices and export revenues. An ongoing public health crisis would also be a threat to political and financial stability within China itself.”

Agathe Demarais, The EIU’s Global Forecasting Director

The EIU’s report notes that the top five risks to the global economy are:

  • US-Iran conflict leads to a spike in global oil prices
  • A trade war breaks out between the US and the EU
  • The coronavirus takes a lasting toll on the global economy
  • Debt burdens cause a recession across emerging markets
  • Hong Kong protests cause an exodus from Asia’s biggest financial centre

In the latest edition of this report, each of the risks is outlined and rated in terms of its likelihood.

Download the full Top five risks to the global economy in 2020 report.