The Economist Intelligence Unit Ltd sees 10 global risks for next year, related to political issues, mainly from the US and China; the military, related to the escalation of the war in Ukraine and the conflict between Israel and Palestine; In addition to risks related to central banks’ monetary policy and climate change.
1. Monetary Policy
There is a moderate risk of inflation re-accelerating due to a rebound in commodity prices due to strong global demand and tight supply. The above could lead to central banks continuing to tighten monetary policy in 2024, which could lead to a global recession.
In emerging markets, the report notes that higher-than-expected interest rates could cause serious currency devaluations, increase inflation and hurt growth.
2. Green energy subsidies
Western economies offer “generous” incentives for companies to invest in clean energy technologies, boosting industrial capacity and allowing greater competition with China, which is a leader in the production of many green technologies.
Most of the incentives include stricter component sourcing requirements – particularly in the US – which have already caused tensions between the EU and the US and could increase the cost of inputs and green energy.
If relations with China face a serious crisis (including deepening concerns about strengthening ties between China and Russia or China’s state-driven industrial policy), Western economies may raise existing tariffs on Chinese imports or expedite decisions on pending countermeasures. Imposition measures and State subsidy charges.
So China will retaliate, blocking exports of raw materials critical to its green transition agenda, such as rare earths, making decarbonization efforts more expensive for developed markets. This would force economies to consider a return to carbon-based technologies, The Economist Intelligence warned.
3. Extreme weather events
The impact of climate change caused by extreme natural events can disrupt supply chains. Disruptions, combined with geopolitical factors, may put more pressure than expected on commodity-based industries, including agriculture, mining and manufacturing; This would lead to upward inflationary pressures.
Protests and labor strikes recorded in countries such as the United States, Europe, South Korea, and Argentina have led to large-scale strikes by unionizing employees of large transnational corporations to demand better wages.
Strikes can cripple domestic industries or public services, affect other sectors or countries, and global growth.
5. China pursues objective of annexing Taiwan
Although direct conflict between China and Taiwan is unlikely in 2024, tensions are high. Taiwan’s elections in January mark a turning point.
Chinese military exercises near Taiwan increase the risk of a miscalculation that could lead to a major incident, including a Chinese incursion into Taiwan’s Air Defense Identification Zone. Also, Taiwan’s declaration of independence (not on the radar) would trigger a Chinese apache.
Regardless of how it ends, a large-scale conflict would weigh heavily on the Taiwanese economy and temporarily isolate its semiconductor industry from global supply chains.