2022 Prediction: International conflict could undermine the rebounding global economy.

At the end of every year, I like to take a moment to reflect on what has transpired in the previous months and make some predictions about what is to come. First, I wrote about trends I see in the hospitality industry (generally positive). Now, my thoughts on challenges, other than COVID, that may slow the global economy’s recovery.

The global economy is showing improvement after nearly two years under the COVID-19 pandemic. However, as the discovery of the omicron variant indicated, things are still precarious.

Along with the ongoing battle against the coronavirus, there are a number of simmering geopolitical tensions that could not only derail economic progress, but push us back towards a recession. Here are a few to keep an eye on:

China seeking retribution after Olympic boycotts.

The United States was the first nation to declare that it would not be sending government officials to the Beijing 2022 Olympics as a stance against human rights violations occurring in China. Shortly after, the UK, Canada, and Australia followed suit — and the Chinese government swore retaliation. The relationship between the US and China is already strained and, as the EU debates a bloc boycott of the games, the stakes could only get higher.

Belarus threatening to freeze Europe.

Last month, the president of Belarus — a Putin ally — was accused of weaponizing thousands of migrants at the Polish border to undermine EU security measures and distract from domestic political issues. In response to the subsequent sanctions that the bloc proposed, President Alexander Lukashenko threatened to cut off its gas supply to the rest of the continent. While this action seems unlikely, the players are unpredictable and the crisis remains unresolved.

Iran building nuclear capabilities.

Thus far, the sanctions the US imposed on Iran when it withdrew from the Iran Nuclear Deal have done little to deter the program’s advancement. International talks are ongoing to revive the accord, but they aren’t moving as quickly as some countries would like. Israel, for example, recently approved $1.5 billion for a potential strike on Iran.

Russia invading Ukraine.

While tension between Russia and Ukraine has been building for years, Putin has recently amassed 100,000 troops at their shared border. Russia has previously gathered its military in this manner without moving forward — though only time will tell whether this is just a show of force or the first step in an invasion. No matter what, there could be massive global repercussions for allies on either side of the line. Should Russia invade, international sanctions are likely to be imposed, and questions regarding the flow of Russian crude, which accounts for 12% of the global supply, could impact energy markets and fuel prices worldwide.

This is, by no means, the entire list. There are other potential flashpoints that could spark broad economic repercussions (Taiwan, Hong Kong, etc.). What makes international conflicts like these so dangerous is that they often have a domino effect. The conflict between Russia and the Ukraine could impact everything from home heating costs in Germany to the price at the pump in the US, for example. There are few economies strong enough to withstand some of these pressures right now. Let’s hope diplomacy and cooler heads prevail.

Danilo Diazgranados is an independent investor in the global food and wine, financial services, real estate, and the hospitality sectors.

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Investor in and lover of fine wine and restaurants.

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Danilo Diazgranados: On wine and food

Danilo Diazgranados: On wine and food

Investor in and lover of fine wine and restaurants.

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