Geopolitics reshape economic forecasts as supply chain risks grow

DAVOS, Switzerland

Geopolitical developments have become central to economic forecasting, as no company can fully protect its supply chains from disruption, the chief economist of French insurer AXA told Anadolu.

On the sidelines of the 56th World Economic Forum in Davos, Gilles Moec said geopolitics affects the economy through both short-term shocks and longer-term structural pressures.

“In the short to medium term, the impact usually comes through oil prices or through tariffs,” he said. “In the medium to long run, it's more about the supply line disruption.”

Moec said a series of shocks dominated 2025, including tariff-driven trade wars initiated by the US, while the risk of renewed trade tensions between Washington and Europe has resurfaced this year.

He said Europe showed relative resilience to the 2025 tariffs but warned that fatigue is setting in as uncertainty drags on.

“In most businesses in Europe, there was a sense that, ‘hey, the shock is behind us, we’re starting to deal with it – we’ve seen that it's not existential and we can start thinking about other things,’” he said.

“But in 2026, we're starting the year with yet another potential shock to our competitiveness, so there’s also this sort of psychological fatigue, which can seep in because it's not just one year of uncertainty, one year of shock – now it’s turning into a second year,” he added.

According to Moec, these developments have placed geopolitics at the center of economic forecasting.

“That’s really a sort of structural long-term noise, which is affecting all economic decisions,” he said. “You can’t be sure that your supply lines will be completely protected against decisions anywhere in the world that could restrict trade in goods, services or data.”

He said global companies are being forced to rethink their supply chains continuously, a process that comes at a cost.

“If you need to constantly diversify your supply lines, it’s detrimental to your economies of scale,” he said.

- Debt fuels uncertainty in tech sector

Moec said rising public debt across many countries poses a major risk to the global economy, alongside geopolitical tensions.

He also pointed to the possibility of valuation corrections in the technology sector, a topic drawing attention at this year’s Davos meetings.

He added that debt is now a concern in the tech sector as well.

Until recently, Moec said, most technology companies financed investments using cash from retained earnings rather than borrowing. But the scale of investment now required for artificial intelligence has changed that dynamic.

“They now have to issue debt,” he said. “Their debt is very, very sustainable – but it changes the way you look at the valuation of those companies.”

“Until last year, honestly, you would not care about the level of interest rates, for instance … because they did not need funding in the first place,” he added. “Now that they are taking funding, you need to look at interest rates.”

- Europe lags in tech leadership

Moec said the technology gap between Europe and the US and China, particularly in artificial intelligence, has widened in recent years.

While Europe has promising AI firms, he said, it has failed to position itself as a global leader or large-scale provider.

“We are late and lagging behind,” he said. “But it is not as if other countries have a 10- or 20-year head start. We’ve got talent, we’ve good got universities, we have skilled labor.”

Moec said it may be too late for Europe to dominate the sector but stressed there is still significant room for progress.

“There is still quite a lot of stuff we can do around this tech,” he said.

He added that issues of sovereignty and data sharing are becoming increasingly important in AI development, noting that where data is stored and who controls it will be critical.

Europe, he said, will also need to address those “big issues.”