Mission Grey Daily Brief - February 11, 2025

Summary of the Global Situation for Businesses and Investors

The global situation is currently characterised by a brutal conflict in the Democratic Republic of Congo, Trump's trade war, rising tensions in the Middle East, and China's demographic crisis. The conflict in the DRC has the potential to spiral into a wider regional war, impacting mineral-rich regions and displacing civilians. Trump's trade war has led to retaliation from China, with China's economy facing a quadruple blow despite a spending boom. Rising tensions in the Middle East, including a fragile ceasefire between Israel and Hamas, and Iran's threat to shut down the Strait of Hormuz, could have significant implications for global oil trade. China's demographic crisis, marked by a decline in marriages and a shrinking population, poses challenges for the country's long-term economic growth.

Conflict in the Democratic Republic of Congo

The Democratic Republic of Congo (DRC) is currently experiencing a brutal conflict that has the potential to spiral into a wider regional war. The conflict is centred around the eastern region of the country, which is rich in minerals and has never enjoyed much stability. The Rwanda-backed rebel group M23 has made significant advances in the region, seizing the capital of North Kivu state and moving south to expand its territory. The humanitarian consequences of the violence are profound, with sexual violence as a weapon of war, children forced to fight, and millions displaced. The conflict is the latest episode of a decades-long struggle in the region, with about 6 million people killed and more than 3 million displaced in the most recent fighting.

The DRC is a prime example of the "resource curse", where an abundance of raw materials leads to authoritarian regimes and civil wars. The country has approximately $24 trillion worth of natural resources, including cobalt, copper, niobium, tantalum, coltan, diamonds, gold, silver, zinc, manganese, tin, uranium, and coal. However, about a fifth of its population relies on aid to survive. The weak state institutions and corrupt governments have failed to benefit the people or invest in essential infrastructure.

The regional summit aimed at ending the violence ended with a call for an immediate and unconditional ceasefire. However, many fear that a ceasefire is less likely than escalation to a wider regional war. The fate of civilians in the region, who are frequently the subject of ethnically targeted attacks, is at stake.

Trump's Trade War

Trump's trade war has led to retaliation from China, with China's economy facing a quadruple blow despite a spending boom. The deflationary crisis in China is compounded by sluggish domestic consumption, an out-of-character production slump, and the recent imposition of tariffs from the United States. As the world's leading industrial manufacturer and top exporter of goods, the health of the Chinese economy has profound knock-on effects for global supply chains and markets.

If China remains trapped in its deflationary spiral, an influx of cut-price Chinese goods into global markets could create intense competitive pressures for global manufacturers. As the world's second-largest importer, a weakened Chinese economy could slash demand for foreign products and deprive exporters of a critical marketplace.

Trump has indicated that he is open to a deal and might not impose tariffs if countries agree to buy more US products, particularly its oil and gas. However, the seemingly ad hoc nature of Trump's announcements of tariffs has caused chaos, confusion, and some abrupt about-faces. The practical difficulties and costs of collecting duties from massive volumes of relatively low-value items have also been a major factor.

Rising Tensions in the Middle East

Rising tensions in the Middle East could have significant implications for global oil trade. A fragile ceasefire between Israel and Hamas is at risk, with Hamas accusing Israel of breaking parts of the agreement. Trump's proposed U.S. takeover of Gaza after the war has the potential to inflame tensions in the region.

Iran's armed forces have warned that they could shut down the Strait of Hormuz if ordered by top officials, a move that would disrupt global oil trade. The Strait of Hormuz is a vital waterway for global energy markets, handling about 20 percent of the world's oil trade. Any disruption could trigger a surge in oil prices and escalate tensions between Iran and Western nations.

China's Demographic Crisis

China is facing a demographic crisis, marked by a decline in marriages and a shrinking population. The number of marriages in China fell to 6.1 million last year, 20% lower than in 2023 and down by more than 50% since 2013. The marital malaise is part of a bigger demographic crisis facing China. Although China boasts the world's second-largest population, at 1.4 billion people, the country's population is declining.

Until 2015, the state enforced a "one-child" policy to avoid urban overcrowding. However, since then, the high costs of child care and education have stymied government efforts to encourage people to have children. The shrinking population poses challenges for the country's long-term economic growth and social stability.

Conclusion

The global situation is currently characterised by a brutal conflict in the Democratic Republic of Congo, Trump's trade war, rising tensions in the Middle East, and China's demographic crisis. These events have the potential to impact global supply chains, markets, and oil trade, as well as regional stability and social cohesion. Businesses and investors should closely monitor these developments and consider their potential impact on their operations and investments.

Themes around the World:

US-Taiwan Trade Relations and Tariff Concerns

Taiwan faces uncertainties from US tariffs, particularly under Section 232, which could impact its export-driven economy. While semiconductors are currently exempt, ongoing trade negotiations and tariff policies remain critical factors for Taiwan's economic stability and investor confidence.

Geoeconomic Offensive and Global Influence

China is leveraging its diplomatic, investment, and technological capacities to reshape global economic order, asserting leadership in regional forums and WTO reforms. This geoeconomic strategy includes military displays and strategic partnerships, signaling Beijing's intent to challenge US dominance and influence global trade rules, with significant implications for international business and geopolitical stability.

Consumer Spending Strength

Vietnam's consumer market is robust, with retail sales and service revenues up over 12% in 2025. Stable inflation, tight labor markets, and rising real wages support expanding household purchasing power. Tourism recovery further fuels spending. However, currency depreciation risks imported inflation, potentially pressuring prices and credit policies, though domestic demand remains a key growth pillar amid global headwinds.

Geopolitical Stability and Ceasefire Impact

The relative calm following ceasefire agreements in Gaza and Lebanon has reduced risk premiums and bolstered economic stability. This geopolitical environment underpins investor confidence, currency strength, and market rallies, influencing trade flows and strategic business decisions amid ongoing regional security challenges.

Banking Sector Dividend Policy Shift

The Bank of Israel relaxed dividend restrictions on banks, allowing up to 75% of quarterly profits to be distributed. This move aims to improve banks' return on equity and address public criticism over super-profits. Enhanced dividend payouts may attract investment in the financial sector but also reflect cautious optimism amid ongoing political and economic uncertainties.

Consumer Confidence and Economic Sentiment

Despite inflation and interest rate concerns, Australian consumer confidence has rebounded to a four-year high, reflecting optimism about economic recovery and personal finances. This shift influences domestic demand, retail performance, and broader economic momentum.

Geopolitical and Economic Policy Uncertainty

Persistent geopolitical tensions, particularly involving US trade and economic policies, continue to cloud the global outlook. This uncertainty affects business investment, consumer spending, and employment growth in Ireland, with downside risks linked to further tariff changes or trade disruptions, while any easing could spur stronger domestic demand.

Tariff Reduction and Export Protection

The ART reduces US tariffs on Malaysian exports from 25% to 19%, the lowest among ASEAN countries with US trade surpluses. It exempts 1,711 tariff lines protecting RM22 billion in exports, including palm oil, rubber, aerospace, and pharmaceuticals. This tariff relief safeguards thousands of jobs and sustains Malaysia’s export competitiveness in critical sectors.

Shekel Currency Strengthening

The Israeli shekel has appreciated significantly, reaching a four-year high against the US dollar, driven by reduced geopolitical risks, improved investor confidence, and a stable ceasefire in Gaza. This currency strength enhances Israel's purchasing power and investment appeal but may pressure export competitiveness, impacting trade balances and multinational business operations.

Limited Impact of Russia Sanctions

Western sanctions on Russia have a relatively limited direct impact on the French economy, with France's exposure to Russian gas at 20%. The government emphasizes diversification of energy supplies to mitigate risks. However, geopolitical tensions continue to influence trade flows and energy prices, affecting business operations and strategic planning in France.

Robust Foreign Reserves and Debt Reduction

Egypt's net international reserves surpassed $50 billion in October 2025, marking 38 consecutive months of growth. This financial resilience supports exchange rate stability, import security, and external debt servicing. Concurrently, public debt declined by 10% of GDP over two years, reflecting successful fiscal reforms and enhancing Egypt's creditworthiness and macroeconomic stability.

Pharmaceutical Export Boom and Economic Growth

Ireland's economy is experiencing unprecedented growth driven by pharmaceutical exports, notably weight-loss drugs like Eli Lilly's Mounjaro. This surge has propelled Ireland to be the fastest-growing advanced economy in 2025. However, the sector faces risks from potential US policy shifts on drug pricing and tariffs, which could impact jobs, investment, and tax revenues.

Rupiah Redenomination Challenges

Indonesia's plan to redenominate the rupiah by removing three zeros faces headwinds due to a weak currency and capital outflows. Economists warn premature implementation could increase volatility and impose high costs on businesses. While aiming to improve transaction efficiency and currency credibility, the initiative requires stable macroeconomic fundamentals and strengthened investor confidence to succeed.

Monetary Policy Challenges and Central Bank Independence

Political pressures on the US Federal Reserve threaten its independence, complicating monetary policy predictability. This undermines investor confidence in inflation control and interest rate stability. Globally, central banks face expanded mandates beyond price stability, increasing policy uncertainty. These dynamics affect capital markets, borrowing costs, and investment decisions, necessitating vigilant scenario planning.

Australia-US-China Strategic Dynamics

Australia faces complex strategic pressures balancing its economic ties with China and security alliance with the US. Rising public concern over US interference and nuanced views on China shape policy and investment decisions. The AUKUS pact and defense spending reflect heightened regional security priorities, impacting trade relations and geopolitical risk assessments.

China-Japan Diplomatic Tensions

Prime Minister Takaichi's remarks on Taiwan have escalated diplomatic tensions with China, leading to retaliatory measures such as travel advisories and import bans. These actions have disrupted trade, tourism, and investment flows, significantly impacting Japan's economy and business confidence, especially in sectors reliant on Chinese demand and cooperation.

Industrial Sector Challenges and Investment Hesitancy

Despite government announcements of €30 billion industrial investments, skepticism persists about a genuine industrial revival. Companies exhibit caution in capital expenditures and workforce expansion due to political and economic uncertainties, risking stagnation in production modernization and innovation critical for long-term competitiveness.

Strengthening Taiwan's National Security Framework

Taiwan is intensifying legislative and military reforms to counter Chinese infiltration and influence, including cybersecurity and economic resilience measures. These efforts aim to safeguard sovereignty and maintain stable business operations amid escalating regional security challenges.

Banking Sector Mergers and Digital Transformation

Egypt's banking sector is undergoing consolidation and digital modernization, driven by regulatory reforms and increased M&A activity. The Central Bank's initiatives focus on fintech integration, cybersecurity, and financial inclusion, positioning banks as digital financial powerhouses. This evolution enhances capital mobilization, operational efficiency, and investor confidence, aligning with Egypt Vision 2030 goals.

Inflation Trends and Monetary Stability

Inflation in Egypt rose 1.3% in October 2025, with annual inflation easing slightly to 10.1%. Price pressures persist, notably in food, housing, and fuel sectors. Monetary reforms, including a flexible exchange rate and IMF-backed programs, have stabilized the macroeconomic environment, supporting competitiveness and gradual inflation control critical for business planning and consumer purchasing power.

Political Instability and Leadership Uncertainty

Growing tensions within the UK Labour Party and speculation over Prime Minister Keir Starmer’s leadership contribute to heightened political risk. This uncertainty exacerbates market volatility and investor caution ahead of critical fiscal decisions, influencing the UK's attractiveness for foreign investment.

Logistics and Warehousing Market Expansion

Egypt's logistics and warehousing sector exceeded $13 billion, propelled by infrastructure investments in the Suez Canal Economic Zone and free zones. Growth is driven by export-oriented manufacturing, e-commerce, and technological advancements in freight and warehousing services. This sector's expansion supports Egypt's emergence as a North African and Eastern Mediterranean logistics hub, enhancing supply chain efficiency and trade competitiveness.

Agribusiness Export Challenges

U.S. partial tariff relief on Brazilian food exports leaves significant penalties intact, eroding market share against competitors like Colombia. This sustained trade uncertainty impacts agribusiness investment, productivity, and export revenues, requiring strategic adjustments to maintain competitiveness in key global markets.

Surge in Gold Prices and Demand

Global geopolitical risks have driven a surge in gold prices, with Indonesia's gold sales rising 20% year-on-year to over 34,000 kilograms in 2025. Gold is increasingly viewed as a safe-haven investment domestically, contributing significantly to inflation. This trend affects commodity markets, investment portfolios, and inflation management strategies in Indonesia.

Geopolitical Tensions with China

China's military activities near Taiwan, satellite surveillance, and territorial claims create persistent geopolitical risks. These tensions threaten Taiwan's sovereignty and could disrupt global supply chains, especially in semiconductors, posing significant risks for investors and multinational corporations operating in or relying on Taiwan.

Foreign Exchange Market Growth

Turkey's foreign exchange market, valued at $11.19 billion in 2024, is projected to more than double by 2033 with an 8.23% CAGR, driven by robust tourism, expanding service exports, and burgeoning e-commerce. These sectors generate steady hard currency inflows, strengthening central bank reserves and market liquidity, which are vital for exchange rate stability and international trade facilitation.

Manufacturing and Industrial Expansion

The kingdom’s manufacturing sector is undergoing rapid growth supported by government policies prioritizing local content and industrial innovation. With a 6% year-on-year expansion and over 12,480 factories, Saudi Arabia aims to triple manufacturing GDP contribution by 2030. This industrial momentum enhances supply chain localization, reduces import reliance, and fosters export-ready technology-driven industries.

Prolonged US Government Shutdown Impact

The historic 43-day US government shutdown in 2025 caused significant economic drag, furloughing 900,000 federal workers and disrupting services. While markets initially treated it as political noise, the shutdown dampened consumer sentiment, delayed data releases, and constrained economic growth, affecting investment strategies and global market confidence. Resolution triggered a relief rally, highlighting market resilience but underscoring operational risks.

SME Financing and Business Environment Challenges

Small and medium enterprises face significant barriers including limited access to credit, burdensome regulations, and governance weaknesses. High compliance costs and inadequate policy implementation restrict SME growth and job creation potential, underscoring the need for targeted financial support, regulatory simplification, and enhanced governance to foster inclusive economic expansion.

Garment Industry Recovery and Challenges

Vietnam's textile and garment sector rebounded with 7.7% export growth in early 2025, becoming the world's third-largest exporter. Yet, high production costs, reliance on imported raw materials, logistics bottlenecks, and US reciprocal tariffs challenge competitiveness. The industry is shifting towards higher value-added products and sustainability, seeking to diversify markets and modernize supply chains to sustain long-term growth.

Critical Minerals and Sovereign Wealth Initiatives

Canada is positioning itself as a strategic player in critical minerals essential for the low-carbon and digital economy transition. The federal budget's creation of a $2 billion sovereign wealth fund and mining tax incentives aim to attract private capital and enhance domestic production. This focus supports supply chain resilience and offers new investment opportunities in sustainable resource sectors.

Rising Oil Exports Despite Sanctions

Iran's crude oil exports have reached a seven-year high of approximately 2 million barrels per day despite renewed UN sanctions. This resilience challenges sanction efficacy, sustains government revenues, and affects global oil supply, presenting complex considerations for international energy markets and trade policies.

Geopolitical Risks in Supply Chains

A DP World study reveals that 82% of supply chain leaders see geopolitical events as moderate to significant risks, with 78% expecting intensification. Despite a median 5% revenue loss from disruptions, only 25% feel very prepared. Inflation, tariffs, sanctions, and military conflicts are top threats, urging companies to embed resilience through diversification and policy engagement.

Geopolitical Tensions Impacting Energy Markets

Heightened geopolitical tensions involving Iran, including tanker seizures near the Strait of Hormuz and military confrontations, inject volatility into global oil markets. Iran's strategic position at a vital energy chokepoint amplifies risks of supply disruptions, potentially triggering sharp oil price spikes and destabilizing global energy supply chains, affecting international trade and investment.

Challenges in State Grain Procurement

The transition to a new state grains buyer agency disrupted Egypt's wheat import tender system, causing delayed payments and contract renegotiations. This reduced market transparency and strained supplier relationships, leading to a 25% drop in wheat imports in early 2025. Recent leadership changes aim to restore credibility, critical for food security and import-dependent supply chains.

SME Development and Structural Barriers

Small and medium enterprises face significant hurdles including infrastructure bottlenecks, high operational costs due to electricity shortages and logistics inefficiencies, burdensome regulations, and limited access to finance. Addressing these structural rigidities is critical to unlocking SME-driven economic growth and sustainable job creation in South Africa.