Europe's Economic Crisis
Prediction: High unemployment rates will deepen the social and political consequences of the crisis as economic turmoil spreads northward on the Continent. Although extremist or anti-establishment parties will gain influence over the political debate, they will not be strong enough to take power in any eurozone country and the traditional elites will manage to stay in charge in 2013.
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Evaluation: Our forecast that the European Central Bank would have the tools to prevent a widespread financial panic in 2013 proved correct, and the traditional political elite managed to stay in power. However, rising unemployment weakened support for the political establishment, while extremist, Euroskeptical and anti-establishment parties gained popularity and increasingly influenced the political debate. We also correctly forecast the spread of the crisis to the north, with core countries such as France and the Netherlands coping with the political and social consequences of stagnating economic activity.
Outlook for 2014: While most countries in the eurozone could see timid economic growth next year, unemployment will remain at critically high levels while consumer and corporate debt will continue to pile up. There will be more protests and more social unrest in 2014, which will continue to erode popular support for most of the traditional political parties in Europe. Nationalist and Euroskeptical parties will benefit from this dynamic and will play a bigger role in obstructing deeper structural reforms and integration policies attempted by the EU bureaucracy.
Ukraine's Relations with Russia and the West
Prediction: Some sort of compromise between Russia and Ukraine over energy infrastructure, and Russia's push for Ukrainian membership in the Customs Union, is likely in 2013.
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Evaluation: While Ukraine pursued energy deals with many European countries to help lessen its dependence on Russian energy, we correctly forecast it would not be enough. Ukraine ultimately decided not to pursue closer integration with the European Union by not signing the bloc's Eastern Partnership agreement. Russia was able to draw a line with Brussels on how far Ukraine will integrate with the West and is now bargaining with Kiev over more favorable energy terms.
Outlook for 2014: Ukraine will now have more room to maneuver in its negotiations with Russia over natural gas and financial issues. Kiev will not abandon its ties with the European Union completely, but financial considerations will push Ukraine to be more cooperative with Russia on political and energy matters.
Mexico's Push for Reforms
Prediction: Legislative gridlock will come to an end, and the country will pass socio-economic reforms including education, tax and energy reforms. These reforms will cause scattered social unrest, and implementation will take years.
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Evaluation: We correctly assessed that the Pact for Mexico would survive and be an effective mechanism for realizing a wide array of reforms before the end of the year. In September, education reform was passed. In October, tax reform was passed. Electoral reform was approved in early December, and legislators are aiming to pass energy reform before the end of the year. Teachers have protested the education reform, and leftist groups certainly will protest the upcoming energy reform. Secondary legislation for many of these reforms has been delayed.
Outlook for 2014: As most of the major constitutional reforms wrap up, and as 2015 midterm elections approach, the Pact for Mexico will likely end in 2014. This does not mean there will not be bipartisan cooperation, but the string of bold, ambitious reforms has probably concluded. 2014 will be all about crafting the secondary legislation to turn these high-level reforms from an idea into a reality. The shape of those laws will determine each reform's impact.
The Effects of China's Economic Shift
Prediction: The decline of low-end coastal manufacturing in China will present enormous opportunities for Southeast Asian countries like Indonesia, Vietnam, the Philippines and potentially Myanmar -- all of which will continue pushing strongly for foreign investment into not only natural resources and raw materials industries but also better urban transport, power generation and materials processing infrastructure. At the same time, China's readjustment to lower overall growth rates will pose near-term challenges, as Chinese consumption of raw materials -- on which much of Southeast Asia has come to depend -- stabilizes from the unsustainable highs of 2010-2011. It could also accelerate the transfer of Japanese business and investment toward emerging Southeast Asian partners as diplomatic tensions and territorial disputes threaten Japanese manufacturing and business interests in China.
Click to Enlarge
Evaluation: In 2013, the emerging Southeast Asian economies demonstrated strong viability in the shifting of global manufacturing chains outside of China. Bolstered by better infrastructure, political stability and the government's strong commitment for foreign investment, Vietnam is recovering from its economic turmoil and embarking on a new wave of investment inflow as Hanoi shifts toward value-added industry. Myanmar, though still in the nascent phase, is also poised for rising investment inflow from countries other than its immediate neighbors. Indonesia, on the other hand, is struggling with an immediate challenge of falling exports and commodity prices, as well as the imminent tapering of easy monetary policies from the developed world. The ongoing tensions with China and rising costs are encouraging Japanese businesses to look for Southeast Asian markets as Tokyo seeks ways to counterbalance China.
Outlook for 2014: We expect the global manufacturing supply chain to continue shifting. However, the inevitable withdrawal of quantitative easing from the developed economies will put greater pressure on the Southeast Asian countries, forcing them to modify their economic structures. Nonetheless, the stability of the Chinese economy -- although it will grow more slowly -- could be beneficial to the Southeast Asian countries while delaying their economic transitions.
The Syrian War and U.S.-Iranian Talks
Prediction: The potential use of chemical weapons by Alawite forces in a state of desperation could accelerate the unraveling of the region; a U.S.-led coalition would have to assemble in haste to contain the chemical weapons threat. To be clear, the United States will make every effort possible to avoid another military campaign in the Islamic world this year. A military conflict between the United States and Iran remains unlikely in 2013. The United States is more likely to allow the effects of sanctions and a reversal of Iran's fortunes in Syria and Lebanon to run their course and continue to weaken Iran's hand than to agree to significant concessions to temper ongoing tensions with Tehran.
Click to Enlarge
Evaluation: The wild-card scenario of a chemical weapons attack by the Syrian regime did play out, but we were correct in emphasizing the extreme U.S. reluctance to engage in such a military campaign. U.S. President Barack Obama needlessly referred the vote to Congress, where he fully expected to encounter resistance, while buying time in backchannel negotiations that led to the current negotiating track with Iran. Russia at the same time seized the opportunity to present itself as the pragmatic statesman with its plan to remove Syria's chemical weapons stockpiles.
Outlook for 2014: Though we did not specifically forecast that the Iranian elections in 2013 would create the political alignment needed to launch U.S.-Iranian negotiations, Stratfor has long argued that a U.S.-Israeli attack on Iran was highly unlikely and that it was only a matter of time before Washington and Tehran began to seriously pursue a strategic rapprochement. The United States will prioritize its negotiation with Iran in 2014 and will not risk undermining this negotiation by significantly boosting support for Syrian rebels. Russia will try to leverage its ties to the al Assad regime and its direct involvement in neutralizing Syria's chemical weapons stash to bargain with the United States on other matters in Europe, while Washington needs Moscow's cooperation to see its Iran negotiation through.
France's Intervention in Mali
Prediction: The military intervention in Mali will occur incrementally as a result of strategic constraints and conflicting interests with Algeria, an emerging regional power. The intervention could begin during the third quarter of 2013, after several months of diplomacy and training to signal to Mali's neighbors and stakeholders that the strategy has comprehensive safeguards.
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Evaluation: The failure to correctly predict the timing of the French intervention into Mali was due to an unexpected Islamist offensive south of the Niger River. This push threatened the intended staging areas for the originally planned intervention and prompted France to mount a rapid military operation to secure these areas.
Outlook for 2014: In 2014, security operations in the country will continue as more U.N. forces arrive in Mali. France itself will draw down its troop levels as Malian elections are finally wrapped up and a secure transition has been guaranteed. A risk for occasional attacks by militants will continue within northern Mali and the wider Sahel region.
Ties Between the Egyptian Military and the Muslim Brotherhood
Prediction: The Muslim Brotherhood's popularity among the people will be undermined as the movement takes on a larger role in governance under severe economic conditions. However, the military and the Brotherhood will not be capable of engaging in bold, unilateral moves against one another. Both sides will continue trying to set boundaries and ultimately develop a new working agreement. There will be obstacles and occasional political crises as a result, but this year will not see a break between the Muslim Brotherhood and the military.
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Evaluation: Since the first protests broke out against former Egyptian President Hosni Mubarak, Stratfor maintained that the military -- not any opposition force that would rise out of the crisis -- would remain the key pillar of the state and that decision-making would rest with the generals in post-Mubarak Egypt. However, we failed to anticipate that in 2013 the military would feel confident enough to sever ties with the Muslim Brotherhood instead of allowing the Brotherhood to continue to absorb criticism for the state's growing economic problems.
Outlook for 2014: The Egyptian military will use the election cycle in 2014 to further entrench its authority and stack the government with political allies. That said, persistent economic stress and the large number of Islamists now denied a political future will fuel a jihadist resurgence in Egypt, spreading increasingly from Sinai to the mainland.
Prediction: High unemployment rates will deepen the social and political consequences of the crisis as economic turmoil spreads northward on the Continent. Although extremist or anti-establishment parties will gain influence over the political debate, they will not be strong enough to take power in any eurozone country and the traditional elites will manage to stay in charge in 2013.
Click to Enlarge
Evaluation: Our forecast that the European Central Bank would have the tools to prevent a widespread financial panic in 2013 proved correct, and the traditional political elite managed to stay in power. However, rising unemployment weakened support for the political establishment, while extremist, Euroskeptical and anti-establishment parties gained popularity and increasingly influenced the political debate. We also correctly forecast the spread of the crisis to the north, with core countries such as France and the Netherlands coping with the political and social consequences of stagnating economic activity.
Outlook for 2014: While most countries in the eurozone could see timid economic growth next year, unemployment will remain at critically high levels while consumer and corporate debt will continue to pile up. There will be more protests and more social unrest in 2014, which will continue to erode popular support for most of the traditional political parties in Europe. Nationalist and Euroskeptical parties will benefit from this dynamic and will play a bigger role in obstructing deeper structural reforms and integration policies attempted by the EU bureaucracy.
Ukraine's Relations with Russia and the West
Prediction: Some sort of compromise between Russia and Ukraine over energy infrastructure, and Russia's push for Ukrainian membership in the Customs Union, is likely in 2013.
Click to Enlarge
Evaluation: While Ukraine pursued energy deals with many European countries to help lessen its dependence on Russian energy, we correctly forecast it would not be enough. Ukraine ultimately decided not to pursue closer integration with the European Union by not signing the bloc's Eastern Partnership agreement. Russia was able to draw a line with Brussels on how far Ukraine will integrate with the West and is now bargaining with Kiev over more favorable energy terms.
Outlook for 2014: Ukraine will now have more room to maneuver in its negotiations with Russia over natural gas and financial issues. Kiev will not abandon its ties with the European Union completely, but financial considerations will push Ukraine to be more cooperative with Russia on political and energy matters.
Mexico's Push for Reforms
Prediction: Legislative gridlock will come to an end, and the country will pass socio-economic reforms including education, tax and energy reforms. These reforms will cause scattered social unrest, and implementation will take years.
Click to Enlarge
Evaluation: We correctly assessed that the Pact for Mexico would survive and be an effective mechanism for realizing a wide array of reforms before the end of the year. In September, education reform was passed. In October, tax reform was passed. Electoral reform was approved in early December, and legislators are aiming to pass energy reform before the end of the year. Teachers have protested the education reform, and leftist groups certainly will protest the upcoming energy reform. Secondary legislation for many of these reforms has been delayed.
Outlook for 2014: As most of the major constitutional reforms wrap up, and as 2015 midterm elections approach, the Pact for Mexico will likely end in 2014. This does not mean there will not be bipartisan cooperation, but the string of bold, ambitious reforms has probably concluded. 2014 will be all about crafting the secondary legislation to turn these high-level reforms from an idea into a reality. The shape of those laws will determine each reform's impact.
The Effects of China's Economic Shift
Prediction: The decline of low-end coastal manufacturing in China will present enormous opportunities for Southeast Asian countries like Indonesia, Vietnam, the Philippines and potentially Myanmar -- all of which will continue pushing strongly for foreign investment into not only natural resources and raw materials industries but also better urban transport, power generation and materials processing infrastructure. At the same time, China's readjustment to lower overall growth rates will pose near-term challenges, as Chinese consumption of raw materials -- on which much of Southeast Asia has come to depend -- stabilizes from the unsustainable highs of 2010-2011. It could also accelerate the transfer of Japanese business and investment toward emerging Southeast Asian partners as diplomatic tensions and territorial disputes threaten Japanese manufacturing and business interests in China.
Click to Enlarge
Evaluation: In 2013, the emerging Southeast Asian economies demonstrated strong viability in the shifting of global manufacturing chains outside of China. Bolstered by better infrastructure, political stability and the government's strong commitment for foreign investment, Vietnam is recovering from its economic turmoil and embarking on a new wave of investment inflow as Hanoi shifts toward value-added industry. Myanmar, though still in the nascent phase, is also poised for rising investment inflow from countries other than its immediate neighbors. Indonesia, on the other hand, is struggling with an immediate challenge of falling exports and commodity prices, as well as the imminent tapering of easy monetary policies from the developed world. The ongoing tensions with China and rising costs are encouraging Japanese businesses to look for Southeast Asian markets as Tokyo seeks ways to counterbalance China.
Outlook for 2014: We expect the global manufacturing supply chain to continue shifting. However, the inevitable withdrawal of quantitative easing from the developed economies will put greater pressure on the Southeast Asian countries, forcing them to modify their economic structures. Nonetheless, the stability of the Chinese economy -- although it will grow more slowly -- could be beneficial to the Southeast Asian countries while delaying their economic transitions.
The Syrian War and U.S.-Iranian Talks
Prediction: The potential use of chemical weapons by Alawite forces in a state of desperation could accelerate the unraveling of the region; a U.S.-led coalition would have to assemble in haste to contain the chemical weapons threat. To be clear, the United States will make every effort possible to avoid another military campaign in the Islamic world this year. A military conflict between the United States and Iran remains unlikely in 2013. The United States is more likely to allow the effects of sanctions and a reversal of Iran's fortunes in Syria and Lebanon to run their course and continue to weaken Iran's hand than to agree to significant concessions to temper ongoing tensions with Tehran.
Click to Enlarge
Evaluation: The wild-card scenario of a chemical weapons attack by the Syrian regime did play out, but we were correct in emphasizing the extreme U.S. reluctance to engage in such a military campaign. U.S. President Barack Obama needlessly referred the vote to Congress, where he fully expected to encounter resistance, while buying time in backchannel negotiations that led to the current negotiating track with Iran. Russia at the same time seized the opportunity to present itself as the pragmatic statesman with its plan to remove Syria's chemical weapons stockpiles.
Outlook for 2014: Though we did not specifically forecast that the Iranian elections in 2013 would create the political alignment needed to launch U.S.-Iranian negotiations, Stratfor has long argued that a U.S.-Israeli attack on Iran was highly unlikely and that it was only a matter of time before Washington and Tehran began to seriously pursue a strategic rapprochement. The United States will prioritize its negotiation with Iran in 2014 and will not risk undermining this negotiation by significantly boosting support for Syrian rebels. Russia will try to leverage its ties to the al Assad regime and its direct involvement in neutralizing Syria's chemical weapons stash to bargain with the United States on other matters in Europe, while Washington needs Moscow's cooperation to see its Iran negotiation through.
France's Intervention in Mali
Prediction: The military intervention in Mali will occur incrementally as a result of strategic constraints and conflicting interests with Algeria, an emerging regional power. The intervention could begin during the third quarter of 2013, after several months of diplomacy and training to signal to Mali's neighbors and stakeholders that the strategy has comprehensive safeguards.
Click to Enlarge
Evaluation: The failure to correctly predict the timing of the French intervention into Mali was due to an unexpected Islamist offensive south of the Niger River. This push threatened the intended staging areas for the originally planned intervention and prompted France to mount a rapid military operation to secure these areas.
Outlook for 2014: In 2014, security operations in the country will continue as more U.N. forces arrive in Mali. France itself will draw down its troop levels as Malian elections are finally wrapped up and a secure transition has been guaranteed. A risk for occasional attacks by militants will continue within northern Mali and the wider Sahel region.
Ties Between the Egyptian Military and the Muslim Brotherhood
Prediction: The Muslim Brotherhood's popularity among the people will be undermined as the movement takes on a larger role in governance under severe economic conditions. However, the military and the Brotherhood will not be capable of engaging in bold, unilateral moves against one another. Both sides will continue trying to set boundaries and ultimately develop a new working agreement. There will be obstacles and occasional political crises as a result, but this year will not see a break between the Muslim Brotherhood and the military.
Click to Enlarge
Evaluation: Since the first protests broke out against former Egyptian President Hosni Mubarak, Stratfor maintained that the military -- not any opposition force that would rise out of the crisis -- would remain the key pillar of the state and that decision-making would rest with the generals in post-Mubarak Egypt. However, we failed to anticipate that in 2013 the military would feel confident enough to sever ties with the Muslim Brotherhood instead of allowing the Brotherhood to continue to absorb criticism for the state's growing economic problems.
Outlook for 2014: The Egyptian military will use the election cycle in 2014 to further entrench its authority and stack the government with political allies. That said, persistent economic stress and the large number of Islamists now denied a political future will fuel a jihadist resurgence in Egypt, spreading increasingly from Sinai to the mainland.
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