Companies will also face several significant trends in regulatory and policy changes. The world will enter an era of neo-statism as COVID-19 continues to heat up the debate on self-reliance, causing many countries to launch efforts to reshore manufacturing or diversify supply chains. In addition, ambitious climate policy agendas are likely, as part of COVID-19 stimulus plans. As more countries announce carbon neutrality targets, it will put pressure on the laggards and raise the stakes for the 2021 United Nations Climate Change Conference (COP26) in November. The geopolitics of technology and data will be shaped by the increasing divergence of technological standards, proliferation in data privacy and localization rules, digital taxation efforts and antitrust enforcement will shape geopolitical competition.
The incoming Biden administration will realign US policy in 2021. President-elect Biden has declared a focus on strengthening industrial and environmental policies, and volatility is also likely in immigration, anti-trust and trade policy. Companies should expect supply chains and production in strategic sectors to shift more to the US economy, while green industries will have expanded growth and investment opportunities.
The sustainability of emerging market debt will likely hit a tipping point in 2021. Across large emerging markets, funding vulnerabilities are expected to be highest in Brazil, India, Mexico and South Africa. Despite international efforts at debt relief, debt resolution is likely to be complicated by COVID-19 and geopolitical dynamics. Growth prospects in key markets could suffer even as companies’ financial and tax burdens may rise.
The Indo-Pacific is becoming the main arena of global competition in the 21st century, underscored by recent tensions between India and China and Australia and China, among others. Geopolitics in the Indo-Pacific will likely be even more volatile in 2021 as the major and middle powers become more assertive in shaping geopolitics while balancing between the US and China. Government interventions will affect growth and investment strategies in the region, while trade agreements and maritime policies could reconfigure supply chains.