Ronald Goseco l December 27, 2024 l The Manila Times
This article will describe what could go wrong and right in 2025.
“Peace on earth, Goodwill toward all men”. These are words from the gospel of Luke which have remained elusive for us. This volatility remains to be the top concern for 2025. The world continues to be driven by widespread polarisation, conflict and violence. The Middle East, Ukraine and even our own backyard in the Indo-Pacific continue to remain as flashpoints. Aside from the human suffering that wars and conflicts inflict on people, these result in geopolitical and economic instability that threaten global supply chains affecting interest rates and push inflation. We need to continually monitor and analyse these risks, stress test our balance sheets and engage in scenario planning to navigate through these uncertainties to effectively prevent potential financial shocks to our institutions.
The second biggest concern would be cybersecurity. Cyberattacks, ransomware and data breaches continue to pose critical risks to our institutions. In an increasingly digital world, we become more vulnerable to cyber attacks that can compromise information, disrupt operations and erode trust. With the rapid advancement of hacking techniques and most especially, artificial intelligence (AI) generated fake data, our digital world has become more precarious than ever before. The rapid pace of technological innovation introduced both opportunities and risks. Embracing emerging technologies surely enhanced efficiency and customer experience. We need to manage the associated risks including technology failures, system outages and data integrity issues. In this era of technological disruption, we need to invest in robust and advanced threat detection systems, attract and retain talent, train current employees and continuously monitor. In fact, many institutions have implemented Zero Trust frameworks that require strict identity confirmation for every device and human trying to access a private network. This model is based on the principle of “never trust, always verify”. At a recent network security briefing, we were all advised to assume that our systems have already been breached and hackers are just waiting for the opportune moment to attack. This sounds almost paranoidal but it keeps us on our toes.
The cybersecurity threat for 2025 looms especially large for the country because of the scheduled general mid term election on May 12, 2025. This threat could lead to massive disinformation. All 317 seats in the House of Representatives and 12 of the 24 seats in the Senate will be contested to form the 20th Congress. Local elections will also be held for the executive and legislative branches in every province , city and municipality. We can learn lessons from the recent incidents in South Korea and Romania. Recall that President Yoon of South Korea was impeached after a tumultuous period of unrest in such an unlikely nation. Yoon declared martial law to hold on to power and this turned out to be the last straw. It turned out that AI played a unique role in his election. He developed an AI deep fake who was more sociable and engaging than his real self during the campaign period. The actual Yoon turned out to be less capable and lacked the leadership that the AI Yoon portrayed. This was reported by Ian Bremmer of the Eurasia Group. In another incident, Carl Bildt who was the former prime minister of Sweden and is now co -chair of the European Council on Foreign Relations shared that the European Union is investigating TikTok over the recent Romanian presidential elections that were subsequently annulled. There was, just days before the election, over 25,000 TikTok accounts that suddenly appeared which heavily supported the far right candidate. These digital shenanigans are not new to us and it is widely believed that we were the original test bed for political trolling by troll armies and by Influential online personalities who are now credited for winning the previous elections. The rise of AI magnified this risk.
Although most market analysts are seeing 2025 as another good year, there is that slim chance that the equity market could falter. The market has been supported on the assumption that AI will deliver macroeconomic returns. A bubble keeps inflating around technology stocks but there is a probability that big Tech will fail to deliver and this would result to disappointing earnings. The AI roll out could also slow down and this could lead to a bubble burst.
Having said that, it is still quite possible that the stars would align next year. While tariffs are likely to push up inflation in the US next year, inflation in other countries including our own seem to be tapering off. This would alleviate household spending, bring down interest and bank lending could pick up again. This would also bolster the financial markets. It is also quite possible that the oil producing countries would release more oil to balance their budgets. The resulting oil price reduction would have favorable ripple effects for oil dependent countries like ours. So many events have to go right in the world for all these good things to happen but we remain optimistic that 2025 will be a more peaceful and prosperous year for all of us.
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Ronald Goseco is a FINEX Foundation Trustee. His opinions are his own. Photo is from Pinterest.