A second great recession highly unlikely, says new global economic report

DUBAI: The global economy is not likely to witness another Great Recession-style collapse, despite several indicators to the contrary in recent months, according to a newly-published report by the Arab Strategy Forum in partnership with Good Judgement Inc, the world’s leading geopolitical and economic forecasting institution.

Titled ‘11 Questions for the Next Decade’, the wide-ranging and far-reaching findings and themes of the report, will be discussed in depth by former ministers, decision-makers and politico-economic thought leaders, including former US Vice-President Dick Cheney, at the 12th edition of the annual Arab Strategy Forum in Dubai on December 9.

The ‘State of the world’ style report tackles 11 vital mega-trends and questions that will define the global social, political and economic landscape in the 10 years ahead. Unlike previous editions, this year’s report looks to predict the future leading up to 2030 — a crucial time for many Middle Eastern economies whose visions are set to come to fruition by that year.

‘11 Questions for the Next Decade’ analyses 11 major political and macroeconomic situations — or ‘mega-trends’ as the report terms them — and their likely consequences to determine where the world is headed, come 2030. Topics covered range from the global recession to the fragmentation of superpowers and Brexit to the Iranian regime and America’s anticipated fall from dominance, to the emerging US-China tech war and the prospective “Splinternet”, water scarcity in the region and the growing crop of gasfields in the East Mediterranean region.

Qualitative and quantitative feedback and data was garnered for the report’s 11 sections following rounds of discussions on Good Judgement’s platform, with a series of ignition questions’ posed to “Superforecasters”: 150 experts from diverse backgrounds ranging from political scientists, economics researchers, scholars, subject-matter experts with professions ranging from finance to intelligence, management and medicine. The ignition questions for each topic seek answers to the issues at the heart of major economic change in the years ahead.

The Superforecasters answers serve as indicators and monitors of predicted change based on the outlined global mega-trends.

Mohammad Bin Abdullah Al Gergawi, Minister of Cabinet Affairs and The Future, and President of the Arab Strategy Forum, said: “The report provides answers to the most pressing questions today, the consequences of which will have a great impact posed on regional and global policies. It explores a range of scenarios that will support the decision-makers of today and tomorrow to guide progress and prosperity for generations to come.

“Unlike previous years, this year’s reports predict the future of the region and the world over the next decade in the context of the current events that will have a major impact. They provide an up-to-date analysis of the increasing need for decision-makers to understand future scenarios on which to base their plans.”

As the world’s first platform for forecasting geopolitical and economic events, both regionally and globally, and targeting the most influential leaders and decision-makers in the Arab World and beyond, the Arab Strategy Forum will provide invaluable insights from the world’s foremost thought leaders on the crucial topics addressed in the report and beyond. Below is a list of the mega-trends, their related ignition questions, and a brief summary of the findings from the ‘11 Questions for the Next Decade’ report.

Based on current global economic performance records and data from the last 100 years of economic cycles, the report sought to find out whether the next recession will be a repeat of the Global Financial Crisis / Great Recession (2007-2009) or whether we are likely to see a return to an earlier pattern of a brief economic downturn followed by resurgent and steady growth.

The report’s superforecasters said there is a 76 per cent chance that the world will not undergo another global financial crisis similar to the Great Recession of 2007 in the next decade, citing central banks’ improved technological ability to adapt and steer skidding economies out of difficulty. In their analysis of the last 100 years’ of business cycles, the Superforecasters concluded that the Great Recession was an outlier rather than the expected norm.

Considering the emerging tendency of two, or a group of countries, setting out to establish new regional trading systems, such as the US-backed Trans-Pacific Partnership or the Russian-backed European-Asian Economic Union, the report noted that such new trading entities pose a populist threat to long-established global trading systems.

It goes on to rule out the possibility of China, Russia or one of the G7 countries withdrawing from the World Trade Organisation by 2030, as doing so would cost more than the gains are likely to be worth in the long run.

However, considering the relentless pressure on the WTO in the face of populism, the post-World War II trading body faces a big challenge in maintaining its status and platform in the next 10 years.

After the fall of empires in the 20th century, the question lingers over whether countries and blocs will fragment in the 21st century. The Superforecasters anticipate a 5 per cent likelihood that the EU will lose 0.5 per cent or more of its territory or population before 2030, a 2 per cent likelihood that Russia or China will, and 1 per cent likelihood that the United States will. Though the uncertainties and problems hanging over the United Kingdom are mainly considered ‘peaceful’, market volatility and decreased consumer confidence could have an impact on the EU’s territory and population in the next decade. The Superforecasters also said that a split or fragmentation in China or Russia, will only occur through a violent disruption.

Despite being the largest economy in the world since the beginning of the 20th century, the US’s position as the world’s number one is under threat from the formation of a multipolar system and the emergence of several countries and regions that contribute today to the international community.

The report claims that there is a 65 per cent chance that the US will still be the world’s largest economy a decade from now, and a 33 per cent likelihood it will be second, after China.

The most prominent countries competing with the United States, in terms of nominal GDP, the report adds, are China, the European Union bloc, and India. And, as the US economy shrinks to the size of other countries, it will be less able to influence other nations of the world.

The Organisation of Petroleum Exporting Countries, Opec, currently holds a share of about 40 per cent of the world’s crude oil production. But the future of the organisation and its domination is likely to be called into question, with the emergence of ‘hydraulic fracturing’, or fracking, and new oil discoveries outside the Middle East and North Africa.

There is a 90 per cent chance that Opec will supply more than a third of the world’s crude oil supply in 2030. However, its fiscal revenue is likely to result in a decline in its production. Given its resilience and adaptation to multiple challenges in past decades, including wars, revolutions and global recessions, the organisation is viable in a carbon-free world, but new and innovative adaptation measures are needed later, the report pointed out.

The Superforecasters see a 66 per cent likelihood of a cyberattack shutting down a major infrastructure system in a G7 country for at least one day before 2030. Outside of the G7, there are countries perhaps more vulnerable. “It will be worth monitoring these situations as harbingers of larger-scale attacks elsewhere. For instance, in the Philippines, government hearings recently raised concerns that China could remotely ‘turn off power’ in the country,” the report noted.

After the discovery of the East Mediterranean gasfields off the coast of Cyprus, Lebanon and Egypt, questions have arisen over whether the East Mediterranean gasfields will enhance the stability of the region or pose a security risk. The report said there’s a risk that offshore gasfields could inflame tensions between nations over disputed drilling rights, but potential energy revenues are worthwhile, and will lead to a strengthening of the region’s economic stability, internal stability of the concerned countries and reduce risk of war.

Following signs of regime fatigue in Iran, coupled with the unrelenting pressure of strict US economic sanctions since its formation in 1979, there has been speculation that the intensity of the sanctions could lead to a collapse of the Iranian regime. However, the report stated that “sanctions are more likely to lead to behaviour change than regime change”, and could see Iran come to the negotiating table with a different approach. However, Iran has overcome many challenges in the midst of regional and international tensions, and its ability to move forward productively should never be underestimated. And, although the status quo is expected to remain well through to 2030, lessons from the past few years in the region are ever-present in the zeitgeist, and should provide a warning that no leadership is impervious to change.

Water scarcity is unlikely to drive any regional conflict in the Mena region over the next decade, the report stated. There is a small, 1 per cent chance of a conflict on the flow of water between Jordan and Israel, according to the Superforecasters. Meanwhile, the chance of a conflict between Egypt and Ethiopia or Turkey and Iraq during the next decade will reach 3 per cent.

The Superforecasters, “overwhelmingly agree that Israel will remain a nuclear power, that Iran and Saudi Arabia are the two states most likely to make attempts to join the club.

The report warns as a caution that any Mena country that pursues the nuclear route may risk provoking unrest in the region. Israel has repeatedly said it will attack Iranian facilities if it believes the regime in Tehran is about to cross the nuclear weapon threshold.

The Superforecasters offer an 80 per cent chance that a ‘splinternet’ — one internet led by the United States and one led by China will not be in place by 2030. “Information will continue to flow across global networks, even as other types of political or ideological information will be blocked,” the report pointed out.