Ronald Goseco l January 12, 2024 l The Manila Times
Last year, the news was dominated by two wars, the Russia-Ukraine war in Europe and the Israel-Hamas war in the Middle East. These two wars caused all sorts of disruptions which affected us in the Philippines. Although they seem so distant, these geopolitical disturbances affected the lives of everyone. These caused supply chain disruptions which initially resulted in higher prices of oil. These in turn resulted in the spiralling of commodity prices as most goods are linked and affected by high energy prices.
According to a study conducted by the Eurasia Group, a leading political risk consulting company, these two wars could expand in 2024. The conflict in the Middle East will particularly pose significant risks to the global economy, widen geopolitical divisions and stoke global extremism. A possible scenario would be a decision by either Israel or Hezbollah to attack the other. If this happens , this would draw both the U.S. and Iran into the conflict. The risk of global extremism could affect us here specially with the expansion of the U.S. Visiting Forces Agreement. Our alliance with the U.S. is helping us prevent the further loss of more territory to China aside from what we have already lost in the West Philippine Sea but this alliance could paradoxically draw another risk by making us a target of Islamic extremists.
The other risk that was highlighted by the study is the slow Chinese economic recovery. According to the Global Times, China has been the Philippines top trading partner for the past seven consecutive years. A further slowdown in China would affect our economic prospects. What’s worse is the possibility that the sputtering economic growth in China could expose gaps in the Chinese Communist Party’s leadership capabilities and result in social instability. This would definitely not bode well for the global economy.
Ungoverned AI was also identified as a potential hazard. All of us were amazed by developments in generative AI with many of us signing up for Chat GPT last year. This is the AI powered language model capable of generating human like text-based context that allowed us to create our own personalised programs. This technology will outpace the necessary governance guide-rails and could attract bad players who could use it to spread fake information even faster than before. This technology is said to outpace Moore’s law by three times so technology capabilities would double every six months. Governance structures have not been developed this fast in the past although there was significant progress last year.
A curious risk that was highlighted by Eurasia was the deepening political division in the U.S. This could undermine U.S. credibility globally and could change foreign policy positions specially if former president Trump wins the election. Former president Trump made it very clear in the past, that he would put America first. If this happens, there will be policy reversals not just in Europe and the Middle East but also here in Asia. The Taiwan Strait could then become a flashpoint.
A risk that we have been anticipating in the country since last year is the dreaded El Nino which will affect the world after a four year respite It is expected to peak in the first half of this year and make our summer months insufferable. We are hoping that the rains would come in time for our planting season. We are also hoping that the reorganized agriculture department prepared sufficiently to avoid both a food and water crisis.
It is quite clear now that 2024 will remain just as challenging as last year. There are good signs though that we should not take for granted. It certainly looks like we dodged the much anticipated global recession and inflation seems to be tapering worldwide. There was also a short – lived market rally before the end of the year. It was described as a Santa Claus rally but was not sustained. The market is being tested and there are as many bulls as there are bears. Who knows? Perhaps the optimists will prevail this year. It is after all a year of the dragon. The dragon is known for its power, vigour and charm. I certainly hope that the opportunities will outweigh the risks that we just described and wish everyone success.
*** Ronald Goseco is a FINEX Foundation trustee. His opinions are his own.