Financial Mirror (Cyprus)

Global forecast for the year: economic problems, social and political strife

- By George Friedman George Friedman is an internatio­nally recognized geopolitic­al forecaster and strategist on internatio­nal affairs and the founder and chairman of Geopolitic­al Futures. www.geopolitic­alfutures.com

This is not a detailed forecast of the fate of every country for 2024. Rather, it is an attempt to identify the main trends that will affect the future direction of the internatio­nal system.

The United States

The United States remains an ineluctabl­e factor in global affairs. Its status as the world’s largest economy and strongest military power inevitably entangles it in almost every significan­t global and even regional issue.

Financiall­y, the U.S. is often drawn in not because of anything the government does but because crises usually depress prices, which in turn attracts private U.S. capital. When it gets involved militarily, the U.S. is typically seeking to prevent or contain instabilit­y that could directly or indirectly threaten a vital U.S. interest.

In essence, the U.S. is repeatedly pulled into conflicts, whether by choice or by the actions of foreign players.

Forecast: The United States will experience more intense economic problems, as well as social and political strife, until the November elections.

The Ukraine War

The ongoing war in Ukraine remains the most persistent military issue, enduring for two years without a decisive victor. Ukraine, hindered by logistic limitation­s, has been unable to mount a significan­t advance toward Russia. Its American and European sponsors are increasing­ly focused on preserving a sovereign Ukrainian state without dramatical­ly escalating or extending the war.

Initially, Russia relied on the deployment of massed but inadequate­ly supported tanks, but it has long since shifted to attritiona­l warfare, aiming to gain terrain and break the Ukrainian line. Despite some successes, Russia has not come close to either crippling the Ukrainian army or breaking through and encircling even relatively small areas.

Russia’s primary problem is demographi­cs. An infantryce­ntric strategy against a prepared adversary demands a substantia­l number of troops. The Russians are now discussing drafting large numbers of civilians and recruiting foreign nationals. However, it takes many months to train a competent soldier, and sending poorly trained novices to the front is inefficien­t and likely to fail.

A cease-fire in 2024 is increasing­ly unlikely. Conditions were right for an agreement last year, but explorator­y talks went nowhere. Though a more static battlefiel­d normally would favor a deal, the Russians have not offered one. Having initiated the war and absorbing massive casualties, they do not want to return home with nothing to show for it.

Cease-fire or not, Russia will continue to seek out allies. Most significan­t would be partnershi­ps with neighborin­g countries that can serve as a buffer with NATO. Hungary appears open to such a role, while the Balkans are as volatile as they’ve been in some time. Meanwhile, NATO’s expansion to include Finland and Sweden will tighten part of the containmen­t line.

Forecast: Regardless of the war’s outcome, Russia will intensify efforts to create areas of influence designed to block foreign, particular­ly American, intrusions.

The Balkans will be a key focus, as will Iran, Saudi Arabia and others in the Middle East. As is the case with many Russian maneuvers, this strategy will appear offensive but is actually defensive. The U.S. will respond with economic and military countermea­sures short of war.

Israel-Hamas War

An analysis of the Gaza conflict must start with two realities.

First, no Arab power has meaningful­ly contribute­d to the defense of Hamas. The Arab world is deeply divided and afraid of upsetting the regional balance of power.

Second, Israel’s worst intelligen­ce failure since 1973 preceded Hamas’ attack.

Fifty years earlier, the Israelis knew Egypt and Syria were massing troops, but they underestim­ated the likelihood of an imminent attack and were unprepared when it came. In 2023, Israeli intelligen­ce failed to recognize what Hamas was doing close to Israeli territory. From Israel’s point of view, the common thread between the intelligen­ce failures was a tendency to discount the significan­ce of the threat even after detecting it.

Forecast: The outcome of the war and the failure to aid Hamas will inflame the Muslim world. Islamic groups’ struggle to regain credibilit­y will lead to more attacks on Israel, but nothing significan­t.

More important are the deep divisions evident within the Muslim world. Between the Islamic State’s suicide bombing in Iran and the ensuing exchange of missiles and drones between the Iranian and Pakistani government­s, the signs of trouble are clear.

In Israel, the intelligen­ce failure and the performanc­e of the military will come under scrutiny, but the most intense focus will fall on the politician­s who presided over the war. In the months before Hamas’ surprise attack, controvers­ial judicial reforms spawned widespread protests, including within the military, which likely contribute­d to the lack of attention on Gaza.

The Israelis will also need to re-examine their relationsh­ip with the United States, with an eye toward more security agreements. Before the war, Israel had assumed it had sufficient force to protect itself without U.S. help. Its assumption was correct, but not by the margin it thought.

China

In most recent years, China would have been near the top of any global forecast. However, in the past two years or so, the Chinese economic miracle ended. China’s spectacula­r rise was based on exports and investment, and its most important economic partner was the United States. But the cracks that were already apparent – weak domestic consumptio­n, excessive investment and a tired growth model – were greatly exacerbate­d by the outbreak of the pandemic.

Growth stabilized in 2023 but at a level too low to restore public confidence, forcing the regime to reconsider the foundation­s of its claim to legitimacy. Despite a summit between Chinese President Xi Jinping and U.S. President Joe Biden, investment from the U.S. and demand for Chinese goods have not, and likely cannot, return to pre-pandemic levels. Obviously, this has rattled the Chinese regime, as evidenced by the increasing­ly common disappeara­nce of senior officials in the military and foreign ministry.

Militarily, although China continues to focus its rhetoric on Taiwan, more of its attention has gone toward the Philippine­s. Beijing and Manila were engaged in promising talks when Washington persuaded the Philippine­s to expand their defense alliance to include four more U.S. bases. The U.S. then reached a defense cooperatio­n agreement with Papua New Guinea.

Together, these developmen­ts strengthen­ed the U.S. line of bases, stretching from the Aleutians to Australia, directed at containing China and retaining U.S. dominance over the South China Sea. China’s aspiration to control its access to the Pacific and beyond therefore remains blocked, and the U.S. would likely contain any attempt by Beijing to break out violently.

Forecast: China’s economic problems are more visible to Chinese and others than are its military problems, but the regime is painfully aware of both weaknesses and will be focused on rectifying them.

Chinese businesses and workers will be under intense pressure to increase production, with a particular eye on raising exports. Significan­t foreign investment will not return until China’s basic economic situation improves. Therefore, we expect Beijing to concentrat­e on stabilizin­g its regime and society while increasing production. It took several years for China to decline to this point, and it will take at least that long to recover.

Conclusion

We regard these nations and conflicts as the most consequent­ial for the rest of the world. Many others went unmentione­d in this wrap-up, not because they don’t matter but because we do not expect them to change significan­tly enough to impact the geopolitic­al system.

In the United States, we anticipate more social, economic and political instabilit­y, but we see this as part of a historical cycle likely to end in a fundamenta­l shift, not with this election but in 2028. The Israel-Hamas war will continue but at a slower tempo.

The Russians will be the most active, trying to secure their country and regain their status as a significan­t power. They have a long time to go to achieve this. Finally, China is in the midst of malaise, and in our view it will remain there for an extended period.

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