Global | Geopolitics is here to stay

Summary

The impact of geopolitical risks on economic phenomena is undeniable, and demand for research in this field is steadily increasing from governments, regulators, the private sector and multilateral institutions.

Key points

• Key points:
• You need only look at the rise of extremism and populism in the last two decades, the recent wars in Ukraine and the Middle East, the growing rivalry between the United States and China, or the trend to ramp up military spending.
• Big data indicators that capture the sentiment in the media about certain geopolitically rooted phenomena need to be complemented by others that show long-term trends well. At BBVA Research we have used this type of indicator by adding an external component that measures the risk exerted on the country by all the other countries in the world.
• An initial observation from this analysis is that global risk fell from the 1980s onwards (end of the Cold War), bottomed out around the time of the financial crisis, and has risen again since the beginning of the last decade, coinciding with the end of globalization.
• Other results confirm the expected regional trend in these indicators. The West Asian regions (which include the Middle East) have endured immense geopolitical stress throughout most of the period, while uncertainty was in Eastern Europe during the Cold War, dipped in the 1990s and has recently returned to those levels.
• There is relatively little geopolitical risk in South America, but there is in North America, where it has increased in the last decade due to growing rivalry with China, although it is not yet at Cold War levels.

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