The Price of Resilience

The global economy has weathered successive shocks with a resilience that defied many forecasts. Yet beneath this apparent stability lies a less visible deterioration: fiscal buffers depleted by successive crises have yet to be fully restored, while new sources of growth are creating dependencies of their own. The International Monetary Fund (IMF), in its October 2026 World Economic Outlook: Resilience Under Strain, Urgent Choices, draws attention to this tension. The ability to withstand past disruptions offers little assurance that economies will retain the same capacity to confront the next. In macroeconomics, surviving a crisis is quite different from preserving the means to finance the next.

The redirection of trade routes and the reorganization of production helped cushion recent supply shocks. At the same time, the race to build artificial intelligence infrastructure has become an important driver of global economic activity, channeling capital and expectations of productivity gains into a narrow range of assets and regional hubs. Markets are pricing in returns that depend on structural transformations still unfolding. The adaptability that helped sustain economic activity now coexists with concentrations of capital and infrastructure that may introduce vulnerabilities of their own.

While capital gravitates toward new sources of expected growth, many governments face narrowing fiscal room to respond to future crises. Rising debt-service costs and refinancing needs can constrain new commitments, particularly where concerns about debt sustainability increase risk premiums. Rebuilding depleted fiscal buffers may take years, potentially under financing conditions less favourable than those prevailing before the crisis.

With fiscal space increasingly constrained, the choice of protective measures carries greater weight. IMF simulations of cost-of-living shocks show that measures suppressing prices can require between three and 22 times as much fiscal support as temporary, targeted transfers to provide comparable protection to vulnerable households. The costs do not necessarily fall on those who benefit: the parties financing an intervention, those receiving its benefits, and those bearing its indirect effects are rarely the same.

When protection requires specialized infrastructure and investments that are difficult to reverse, decisions justified by immediate risks may limit the resources and alternatives available to address future vulnerabilities. The cost of such commitments depends not only on the capital they absorb, but also on the flexibility they leave behind. Economic and political interests formed around these investments may prolong their existence even after the risks that originally justified them have changed.

Long-term commitments and public incentives have gained influence over investment decisions as the geography of global capital shifts. According to UN Trade and Development (UNCTAD), in its World Investment Report 2026: International Investment in a Turbulent Era, strategic sectors accounted for 44% of the value of announced greenfield projects in 2025, up from 16% in 2020, a shift driven substantially by the technology race. Although these figures refer to announcements rather than realized investment, they reveal a growing concentration of planned investment in sectors where commercial, technological, and economic security considerations increasingly overlap.

Attracting investment does not necessarily mean capturing the value it creates. Strategic projects can foster knowledge networks and productivity spillovers, but the capacity to absorb them depends on human capital, infrastructure, and institutional conditions. Economies lacking these capabilities often remain confined to lower-value stages of production, even when they control inputs essential to global supply chains. Capital inflows may expand output without expanding, to the same extent, the alternatives available to an economy when the next disruption arrives.

Competition among industrial policies compounds these disparities. Large-scale subsidies can make investments viable that would not otherwise proceed on the same terms, while also drawing projects away from economies unable to offer comparable incentives. Sovereign decisions to secure critical industrial capabilities may serve legitimate national security objectives, with consequences for investment opportunities and competitive conditions that extend well beyond the borders of the governments financing them.

The geographical reorganization of production does not necessarily eliminate the risks it is meant to reduce. Relocating one stage of production may lessen exposure to a particular supplier or territory while preserving dependence on technological bottlenecks or hard-to-replace inputs elsewhere in the chain. Effective resilience depends on the ability to replace components and suppliers, and on how different stages of production are interconnected, rather than simply on the geographical dispersion of factories. An economy may reduce its direct exposure to a trading partner while retaining critical dependencies at less visible points in the chain.

When different supply chains rely on the same critical nodes, a localized disruption can reach distant activities and, where financial vulnerabilities are present, impair payments and access to credit. Networks with alternative suppliers and sufficient resources to reorganize operations, by contrast, may absorb similar shocks with very different consequences. The scale of the damage depends as much on the severity of the initial event as on the interdependencies established before it.

The choices made by the largest economies to protect their productive and financial capacities also shape the conditions under which others will face future crises. When unilateral policies constrain the room for maneuver and financing options of trading partners, they can weaken the system’s capacity to absorb shocks – a capacity on which the major economies themselves will depend when the next disruption comes. Some of those costs may emerge where the governments responsible have less capacity to intervene.

Lívia Louvel is an economist, CEO of GoGlobal Consulting and founder of Brazil Observatory.