When talking with someone earlier on this week, he said that we are in a state of flux. It set me thinking and I did come to the conclusion that the global geopolitical economic situation (I know that is quite a mouthful) is indeed in a state of flux. Uncertainty reigns as to how things will develop on a number of fronts. This will then have a certain impact on the economy. What impact this will be is still unknown.

We could start with the coronavirus. It is now becoming recognised that the term ‘post-pandemic’ should not be taken to mean when the coronavirus will be no more, as this is most unlikely to happen. Certain countries are already expecting the next wave once the cold weather sets in. As such ‘post-pandemic’ is being taken to mean when we get used to living with it, like we have got used to living with what we call the ‘common cold’.

When we do get used to live with the coronavirus, how will this affect our social behaviour and hence our economic behaviour? How will consumer habits change in a definitive way? How will our travel habits and preferences change?

The international political situation does not present much certainty either. We can take Germany as an example. As things stand while I write, the most likely solution is a three-party coalition among parties who may have very differing views on certain crucial aspects such as fiscal policy.

Uncertainty reigns as to how things will develop on a number of fronts. This will then have a certain impact on the economy

How long will Germany remain with a caretaker government? We need to keep in mind that Germany is the locomotive of the European economy, and all too often what it says goes.

Then there are the verbal skirmishes between the US and China. How serious are US and Chinese officials when they make certain statements about protecting their national interests?

The new alliance announced last week (much to the disgust of France) among the US, Great Britain and Australia (dubbed as Aukus) seems to have compacted again the Anglo-Saxon world.

Where does that leave the EU (post-Brexit) on the world political stage? What economic alliances will be forged as a result of closer political relations?

Some analysts have claimed that the stance being adopted by the US is indicating that it does not wish to be the global policeman anymore and is seeking to adopt a stance where it is not recognised anymore as the world’s only superpower. Would this mean that there will be no superpowers but a number of powers? And would there be a number of economic powers and a number of political powers, and the two lists would not necessarily be identical?

A third element is the decision by China to ration electricity in certain industrial zones to reduce emissions. This has disrupted production. With the increase in freight costs for products coming from the Far East, will supply chains be disrupted further? As other countries seek to adopt more sustainable economic models and the effects of climate change start to bite harder, how will the global economy react?

There is also the expectation that, following the fiscal stimulus provided by governments during the pandemic to sustain their economy, inflation will increase. If inflation does increase, interest rates are likely to rise. If interest rates rise, are businesses and consumers in a position to absorb these increases?

Moreover, do the businesses which have been hardest hit by the restrictions imposed by governments due to the coronavirus be able to survive when government support is tapered off and the accumulated debts need to be paid off? Will there be defaults by governments, businesses and financial institutions?

I have put forward a number of questions to which answers are very hard to come by, unless the answer is an “I do not know”. No wonder the world and, as a result, Malta (whatever one may say, our country cannot escape the impact of such uncertainty) is in a state of flux.