January 16, 2025
SINGAPORE – The eruption of more armed conflicts worldwide as Russia’s invasion of Ukraine grinds on and wars rage in the Middle East and Sudan poses the greatest risk to global economic growth and prosperity in 2025, according to a World Economic Forum (WEF) report released on Jan 15.
Nearly a quarter (23 per cent) of respondents to the WEF’s Global Risks Perception Survey for 2024-25 said that “state-based armed conflict” would pose a material crisis on a global scale in 2025. State-based armed conflict refers to the bilateral or multilateral use of force between states or between a state and non-state actors, often with ideological, political or religious goals. This includes but is not limited to, hot wars, proxy wars, civil wars, guerilla warfare, terrorism, genocide and assassinations.
The survey was conducted as part of the WEF’s Global Risks Report 2025, which was unveiled in the run-up to the WEF Summit kicking off in Davos on Jan 20.
In particular, the report noted that in addition to an escalation of existing crises, the risk of conflict over Taiwan and China could not be ruled out, which may have been a factor in respondents’ evaluation of the challenges in 2025. With both the US and China set to ramp up military activities close to Taiwan and the Chinese mainland in the coming years as a show of strength and a deterrent, it warned that there was a major risk of miscalculation by either side that could end in the accidental loss of life or destruction of hardware. This could lead to tit-for-tat military escalation.
There are already signs of an uptrend in conflicts globally: the number of armed conflicts worldwide has been elevated since 2014 in comparison to the period from the 1990s to the early 2010s, according to data from the Uppsala Conflict Data Program, which was cited in the WEF’s report.
In that regard, the WEF said that survey respondents’ ranking of state-based armed conflict as the top risk facing the globe today could demonstrate their belief that the world is currently in an era of “geopolitical recession” marked by multiple conflicts even as multilateralism faces headwinds.
The report asserted that trade tensions between the US and China could heighten the prospect of any armed conflict. Around 8 per cent of the survey respondents indicated that such geoeconomic confrontation – in the form of sanctions, tariffs and investment screening – was the most pressing problem facing the globe in 2025.
It came third, behind state-based armed conflict, and extreme weather events, in the greatest challenges for the planet in 2025.
With the incoming administration of US President-elect Donald Trump already threatening to impose restrictive trade measures on the US’ friends and foes alike – sparking off warnings of retaliatory action – the fears that global trade will be adversely affected could prove well-founded.
The WEF report said that in a worst-case scenario for tariff escalation over the next two years, governments could impose tariffs not only on countries or blocs imposing similar measures on them but also on all their trading partners.
This could lead to a pattern of rolling, progressive protectionism at different speeds in different sectors, resulting in a significant contraction in global trade.
Based on bilateral trade surpluses with the US, restrictions on market access for US exports, and existing tariffs, among other criteria, South Korea is the country most at risk of being targeted by restrictive US trade practices, followed by China, Japan, Canada and India.
However, Brazil, the EU, Indonesia, Ireland, Italy, Kenya, Malaysia, Mexico and Thailand are also likely to be in Trump’s sights.
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Trade measures imposed against Beijing could accelerate a broader decoupling of the US and China, and their respective allies.
An Executive Opinion Survey (EOS) of over 11,000 business leaders from 121 countries that was conducted as part of the WEF report found that geoeconomic confrontation is the third-most significant concern for Taiwan, China and Hong Kong in East Asia, while Japan and South Korea rank it among their top 10 risks.
However, the WEF noted that geoeconomic fragmentation would affect all economies, with emerging markets and low-income countries likely to suffer the most.
The EOS found that business leaders are also apprehensive of the prospects of a global economic downturn, ranking it as their top concern over the next two years in five regions – Latin America and the Caribbean, Northern America, Oceania, Asia, and Southern Asia.
Pertinently, the assessment that state-based armed conflict is the biggest risk facing the world today – based on a survey of around 900 academics, business leaders and policymakers – comes at a time when national security considerations have begun to dominate government agendas.
The report warned that the current weakness of the UN Security Council was a major concern.
It pointed out that even though there had been discussions over the past year about ramping up UN peacekeeping operations, the size of the multilateral organisation’s peacekeeping forces had declined from over 100,000 in 2016 to around 68,000 in 2024.
The relevance of the Security Council is likely to be further diminished by the less favourable stance of the incoming US administration towards the global body in general and its preference for unilateral solutions to conflict.
This could cause other governments to also lose faith in the global body.
But a greater danger is the decline of multilateralism in general as a forum for resolving conflicts in a more adversarial world where winner-takes-all victories on the battlefield prevail over negotiated, multi-stakeholder peace agreements.
The WEF report noted that discussions that seek to reform the UN Security Council are unlikely to make any progress in the near future, given complex national interests and a lack of political will.
In the absence of any viable alternative global governance setup, the growing vacuum in ensuring global stability at a multilateral level will prompt governments around the world to take national security matters into their own hands.
And as countries attempt to gain a greater degree of autonomy and self-sufficiency, they are likely to coordinate security and defence efforts only with select allies or make unilateral military decisions.
There is ample evidence that the global arms race has been accelerating. According to the report, global military expenditure increased for the ninth consecutive year to reach a total of US$2.4 trillion (S$3.23 trillion) in 2023.
The top five military spenders – the US, China, Russia, India and Saudi Arabia – accounted for 61 per cent of the total.
The report warned that as governments with strengthening militaries perceive that multilateral constraints on unilateral military action are weaker, there could be more instances of cross-border military intervention.
When it comes to the other top risk, survey respondents who picked extreme weather events as their top concern are likely to have been motivated by the losses of US$320 billion globally in 2024 due to cyclones, wildfires and floods, among other weather events supercharged by climate change. The damage estimate was made by reinsurance firm Munich Re on Jan 9.
The situation could be worse in 2025, judging by the start to the year. In the US, devastating wildfires have left at least 25 dead and destroyed over 12,000 homes in California, with one firm pegging the total damage and economic losses at US$250 to $275 billion.
Other risks identified in the report include misinformation and disinformation, societal polarisation and a critical change to the earth’s systems.
- Arvind Jayaram is an assistant foreign editor at The Straits Times