The newer risks include rapid and unconstrained development of dual-use technologies and the growing pressure of climate change impacts. Older risks are inflation, cost-of-living crises, trade wars, capital outflows from emerging markets, widespread social unrest, geopolitical confrontation and the spectre of nuclear warfare.
Apart from the return of ‘older’ risks, 2023 is witnessing amplification of these risks by relatively newer ones like unsustainable levels of debt and a new era of low growth; low global investment and de-globalisation; a decline in human development after decades of progress, the World Economic Forum’s (WEF) Global Risks Report 2023 said recently.
Together, these are converging to shape a unique, uncertain and turbulent decade to come, the report, which presents the results of the latest Global Risks Perception Survey (GRPS), said.
The next decade will be characterised by environmental and societal crises, driven by underlying geopolitical and economic trends, it said.
Cost of living crisis is ranked as the most severe global risk over the next two years, peaking in the short term. Biodiversity loss and ecosystem collapse is viewed as one of the fastest deteriorating global risks over the next decade, and all six environmental risks feature in the top 10 risks over the next 10 years.
Nine risks are featured in the top 10 rankings over both the short and the long term, including geo-economic confrontation and erosion of social cohesion and societal polarisation, alongside two new entrants to the top rankings: widespread cybercrime and cyber insecurity and large-scale involuntary migration.
The economic after-effects of COVID-19 and the war in Ukraine have ushered in skyrocketing inflation, a rapid normalisation of monetary policies and started a low-growth, low-investment era, the report noted.
Governments and central banks could face stubborn inflationary pressures over the next two years, not least given the potential for a prolonged war in Ukraine, continued bottlenecks from a lingering pandemic, and economic warfare spurring supply chain decoupling, it said.
Downside risks to the economic outlook also loom large. A miscalibration between monetary and fiscal policies will raise the likelihood of liquidity shocks, signalling a more prolonged economic downturn and debt distress on a global scale.
Continued supply-driven inflation could lead to stagflation, the socioeconomic consequences of which could be severe, given an unprecedented interaction with historically high levels of public debt. Global economic fragmentation, geopolitical tensions and rockier restructuring could contribute to widespread debt distress in the next 10 years.
Economic policies will be used defensively, to build self-sufficiency and sovereignty from rival powers, but also will increasingly be deployed offensively to constrain the rise of others, the report noted.
Intensive geo-economic weaponisation will highlight security vulnerabilities posed by trade, financial and technological interdependence between globally integrated economies, risking an escalating cycle of distrust and decoupling. As geopolitics trumps economics, a longer-term rise in inefficient production and rising prices becomes more likely, it said.
With a crunch in public-sector funding and competing security concerns, our capacity to absorb the next global shock is shrinking. Over the next 10 years, fewer countries will have the fiscal headroom to invest in future growth, green technologies, education, care and health systems, the WEF report added.
Fibre2Fashion News Desk (DS)