In brief
Geopolitics in 2024 will be volatile and unstable. Before digging into the 2024 Geostrategic Outlook (pdf), let’s first look back at the past year. How closely did the expectations in the 2023 Geostrategic Outlook align with reality?
The past year was yet another in which businesses faced an extraordinary collection of geopolitical events and deepening trends. Many geopolitical developments unfolded largely as we expected. “Stabilized volatility” – one of the overarching themes we identified in our 2023 Geostrategic Outlook – proved an apt description of geopolitical tensions and government intervention in economies persisting and plateauing at an elevated level. However, geopolitical tensions began to rise again in the fourth quarter, particularly in the Middle East – a region that we had not included in our top 10 developments for 2023.
Our second overarching theme from 2023 also stood the test of time: governments around the world faced a variety of “policy trade-offs.” Among the most consequential and dynamic policy areas has been energy security and associated sustainability concerns. Climate policy continues to reign near the top of the agenda for many governments, culminating in the recent 2023 United Nations Climate Change Conference (COP28) in the UAE. However, central banks and fiscal policymakers managed the inflation-recession paradox better than had been expected. And we did not foresee how rapidly generative artificial intelligence (AI) would emerge, so it was a surprise that regulation of AI jumped to the top of the agenda.
Looking ahead, many of the themes and developments from 2023 will continue to play out in 2024.
One defining feature of the geopolitical environment in 2024 will be multipolarity. A greater number of powerful actors will shape an increasingly complex global system. As great powers, the EU, the US and China will continue to shape the global operating environment in profound ways. Geopolitical swing states – countries such as India, Saudi Arabia, Turkey, South Africa and Brazil that are not specifically aligned with any major power or bloc – will gain more sway over the international agenda.
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Smaller countries and non-state actors will also seize on opportunities to redraw boundaries or otherwise shape their corner of the geopolitical multiverse. The war in Ukraine and geopolitical conflicts that have flared up in several other parts of the world may only be the beginning.
The second defining feature of geostrategy in 2024 will be de-risking. The COVID-19 pandemic and the war in Ukraine highlighted countries’ global dependencies and the challenges in achieving resilience with just-in-time and globalized supply chains – especially when production was concentrated in a small number of markets.
Governments have responded by reengaging in or expanding their reliance on industrial policy. They are seeking to promote greater domestic production of critical products. In certain markets, geopolitical competition has already been embedded with these industrial policies. We will see more of this explicit connection between economic policy and foreign or national security policies in the year ahead.
Building on its momentum in 2023, the geopolitics of AI will become more important in 2024. Governments will race to regulate AI to reduce the potential of sociopolitical risks. But policymakers will simultaneously try to foster domestic AI innovation to compete geopolitically. As a result, AI will be a central dynamic in US-China relations. In 2024, the dual races to innovate and regulate AI will accelerate the shift toward distinct geopolitical blocs.
But 2024 will also be different in several important ways. The geopolitics of the oceans will feature more prominently in the global zeitgeist. The oceans are home to 94% of all life on our planet, and they are an increasingly important economic and national security resource. A staggering 90% of global goods trade is shipped via maritime routes, but many of the world’s busiest maritime transit corridors are at risk of geopolitical disruption. And deep-sea mining is forecast to account for at least one-third of the supply of critical minerals necessary for the energy transition. Companies will need to take ocean geopolitics into account when setting their supply chain and sustainability strategies.
And 2024 will be a year of elections – we call it the global elections supercycle. Voters will go to the polls in markets accounting for about 54% of the global population and nearly 60% of global GDP. This will generate regulatory and policy uncertainty in the short and medium term. We may look back on some – especially the US and EU – as the most consequential elections in decades, amid competing visions for international relationships and economic policy that will fundamentally impact the global business environment.
Current events muddy the geopolitical outlook and raise the risk of more significant conflict escalation in the year ahead. But what is crystal clear is geopolitics has become a multiverse: a complex mix of alliances and rivalries, with overlapping bilateral, regional and other types of institutional groupings. These dynamics, coupled with more countries heading to the polls in 2024 than in any year in recent history, elevate the likelihood of geopolitical surprises in 2024 – on both the downside and the upside.
The geopolitics surrounding AI and the oceans are just two of the top 10 geopolitical developments in the 2024 Geostrategic Outlook. The EY Geostrategic Business Group selected these developments because they are most likely to have significant impacts on organizations across sectors and geographies in 2024. As executives seek to anticipate and plan for geopolitical disruptions, two key themes will be important to keep in mind in 2024. The first theme is multipolarity, as geopolitical power becomes more dispersed amid heightened competition between blocs or alliance networks. The second is de-risking, with countries’ policy stances seeking to reduce global dependencies, prioritizing national security (broadly defined) over purely economic considerations.
The top 10 geopolitical developments in the 2024 Geostrategic Outlook will have broad-based impacts on companies across sectors and geographies. But each development is likely to have more direct impacts on certain sectors and sub-sectors, particularly in the near to medium term.
Multipolarity and de-risking will pose both challenges and opportunities for companies around the world. Each of the developments explored in the 2024 Geostrategic Outlook will affect companies in unique ways and will therefore necessitate specific geostrategic actions to capitalize on the opportunities they present while also mitigating the risks they pose. At a high level, there are three no-regrets geostrategic moves that companies should take.
In this era of profound change in the international system, the importance of geopolitics to corporate strategy is at its highest level in a generation. Successfully weaving geopolitical dynamics into corporate strategy will increasingly be a competitive advantage.
Many companies’ supply chains are exposed to geopolitical developments. Executives need to determine how they can better position their company’s operating model and supply chain strategy to proactively adjust and increase their resilience to geopolitical disruptions.
Multipolarity and de-risking are influencing government approaches to policies regarding climate change and natural resources, which will affect companies’ sustainability requirements, costs, competitive opportunities and strategy. Executives should incorporate new policies and regulations, as well as signals for how such policies may evolve in the future, into their sustainability strategies.
Global executives seeking to anticipate and plan for geopolitical disruptions should keep two key themes of multipolarity and de-risking in mind in 2024. There are three pivotal steps to take to get ahead of the top developments coming in the next year.
