In a survey that precedes the annual Davos meetings of global elites, the World Economic Forum warned Wednesday that the cost of living crisis is the biggest global risk over the next two years.
The World Economic Forum report called the cost-of-living crisis the “greatest short-term risk” between now and 2025, followed by natural disasters, extreme weather events and “geoeconomic confrontation”.
Global inflation remains at very high levels after energy and food prices rose last year, largely due to the invasion of Ukraine, an agricultural hub, by major oil and gas producer Russia.
Cost of living and debt service
Supply constraints caused by the Covid pandemic have also contributed to decades of high prices for consumers.
“Conflict and geo-economic tensions have led to a series of closely interconnected global risks,” said the annual study ahead of next week’s meeting in the Swiss Alpine village of Davos.
“These problems include the energy and food supply crisis, which is likely to continue over the next two years, and strong increases in the cost of living and debt service,” she added.
Such crises, the report said, “risk undermining efforts to address long-term risks, particularly those related to climate change, biodiversity, and investment in human capital.”
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The survey, produced with consulting firm Marsh McLennan and Zurich Insurance Group, took into account the views of more than 1,200 global risk experts, policymakers and industry leaders.
“Energy, food, debt and disasters dominate the short-term risk landscape,” said Saadia Zahidi, Managing Director of the World Economic Forum.
“Those who are already the most vulnerable are suffering – and in the face of multiple crises, those deemed vulnerable, in countries rich and poor, are expanding rapidly,” she wrote in the report.
– ‘Changing the stakes of war’ –
At a press conference in London on Wednesday, Zahidi highlighted the fact that respondents were rating conventional warfare as less dangerous than geoeconomic conflict — such as sanctions, punitive tariffs and other forms of trade war — or cyber warfare.
“The nature of how conflict occurs is changing,” she said.
“That doesn’t mean we shouldn’t be concerned, because for the first time in a fairly long time, military spending has seen a small but evident decline in many large economies.”
The World Economic Forum study called on leaders to act “collectively and decisively, balancing short- and long-term perspectives.”
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He concluded the need for cooperation to promote “financial stability, technology management, economic development, and investment in research, science, education, and health.”
This year will be marked by “increased risks” related to food, energy, raw materials and cyber security that could further disrupt global supply chains and influence investment decisions, said Carolina Clint, lead risk management at Marsh.
“At a time when countries and organizations must ramp up resilience efforts, economic headwinds will limit their ability to do so,” she wrote in the report.
Many analysts warn that the global economy will stagnate in 2023 as inflation continues to rise.
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