The Polycrisis and Emerging-Market Resilience: Climate Shocks, Financial Volatility, and Geopolitical Fragmentation as Simultaneous Stressors – Building Adaptive Macroeconomic Frameworks for Compounding Risks

This report examines how climate shocks, financial volatility, sovereign debt pressures, and geopolitical fragmentation interact to create compounding macroeconomic risks for emerging and developing economies. It argues that these interconnected stressors can produce non-linear effects, including capital flight, currency depreciation, food and energy inflation, shrinking fiscal space, and sovereign debt distress, making conventional approaches designed for isolated shocks increasingly inadequate. Drawing on regional cases and scenario stress-testing, the report proposes an adaptive macroeconomic framework centred on counter-cyclical fiscal buffers, local-currency financing and hedging, climate-resilient debt mechanisms, strategic reserves, diversified supply chains, and stronger social protection systems. It concludes that building resilience to polycrisis requires governments and financial institutions to shift from reactive crisis management towards integrated frameworks capable of anticipating and absorbing simultaneous shocks.