8 Major Risks to Watch After COVID-19: 'P·A·N·D·E·M·I·C'

Global Risks in the Post-COVID Era
Nationalism, Debt Crisis, South American Economy, Worsening Inequality, and More

[Asia Economy Reporter Kim Eunbyeol] Despite the continued spread of the novel coronavirus infection (COVID-19), economic conditions are gradually improving as countries around the world ease economic restrictions. However, it is pointed out that global risks still lurk even after COVID-19. The International Finance Center identified eight global risks to watch after COVID-19 and emphasized the need to prepare for future emerging threats.

The International Finance Center stated, "The COVID-19 crisis occurred suddenly without any special signs, and during the recovery process, the level of risk increased or abruptly changed direction, becoming more dangerous," adding, "Escaping COVID-19 is a priority, but it is also time to prepare for upcoming risks."

① Spread of Protectionism Wave = The current crisis revealed issues such as supply disruptions through the Global Value Chain (GVC), lack of healthcare infrastructure, instability of key companies, and domestic job shortages, which may strengthen 'protectionism.' As protectionism intensifies, problems such as food security, control of key companies (nationalization, etc.), reshoring, restrictions on foreign investment and employment, and vaccine nationalism may arise.

② Alienation from Digital = COVID-19 has accelerated digital transformation strategies such as GVC restructuring, remote work, and work automation, making the digital industry a new growth engine. However, as the digital economy accelerates, employment structures change, and only face-to-face service industries grow, there is concern that some workers may be alienated from the digital industry in the post-COVID era. In particular, small and medium-sized enterprises that find digital investment difficult may face crises, and there is also a risk of cybersecurity breaches.

③ Normalisation Risk = To respond to COVID-19, the four major central banks increased assets by more than $5 trillion, with total assets exceeding $24 trillion. However, if liquidity supply is halted and withdrawal begins after COVID-19, asset prices could plummet and bond market supply and demand could be disrupted. The Bank for International Settlements (BIS) has advised that "countries should prepare exit strategies as soon as possible."

④ Debt Threat = Global total debt is expected to reach a record high of 344% of global GDP due to expanded fiscal spending and private borrowing. Advanced countries' government debt is also expected to rise to 122%, twice the sustainable level (60%). Excessive debt could lead to ▲credit rating downgrades (including G7) ▲Southern European fiscal crises ▲emerging market financial crises, and in the private sector, ▲corporate bankruptcies ▲bank insolvencies may expand.

⑤ Exuberance & Bubbles = Major countries have injected unlimited assets, supported speculative-grade corporate bonds, and aided crisis companies, confirming the commitment of "support where there are problems," which helped financial markets recover quickly. However, this phenomenon may encourage aggressive risk-taking by investors, raising concerns about moral hazard. Additionally, it could lead to asset price bubbles, which may cause greater shocks if adverse events occur.

⑥ Murky Latin (Prolonged Latin American Economic Crisis) = Before COVID-19, the Latin American region was already in low growth due to declining commodity prices, high debt, and worsening fiscal and current account balances. On top of this, political and social instability caused by COVID-19 may prolong the recession. The International Finance Center stated, "With growth stagnation, credit rating downgrades, and reduced foreign capital inflows, many countries are likely to face economic and financial crises, making it the most neglected region among emerging markets."

⑦ Inequality Widening = The COVID-19 crisis has exposed widening inequalities and gaps in various aspects such as healthcare services, employment, income, and education between vulnerable groups and the wealthy,

between older and younger generations, and among different skin colors and races. Such inequalities may lead to anti-government and anti-establishment movements, political instability, and extremism. The United States is an example where employment disparities and the severity of impact during crises have brought inequality issues to the surface.

⑧ Cold War 2.0 (Polarization of the International Community) = Once COVID-19 subsides, the rivalry between the U.S. and China is expected to intensify further due to hegemonic competition and disputes over responsibility for the crisis. The alignment of countries choosing sides between the U.S. and China could expand globally. If the international community becomes polarized, global cooperation will weaken, international organization governance will be undermined, and economic pressure on opposing countries and increased geopolitical risks may follow.

This content was produced with the assistance of AI translation services.