Increased cost of living dominates global risks, reveals WEF survey

The Global Risks Report 2023 by the World Economic Forum (WEF) has reported the results of its latest Global Risks Perception Survey (GRPS).  The report highlights the current crises at hand, the risks which are likely to be severe in the next decade and mid-term futures which explore how the ongoing and the incoming crises together could evolve into a 'polycrises' by 2030.

Economic Impact
The report by the WEF predicts that  an increased cost of living dominates global risks in the next two years while climate action failure dominates the next decade. The report ranks “Cost-of-living crisis”  as the most severe global risk over the next two years, peaking in the short term.

The report details that the war in Ukraine and the aftereffects of Covid have led to a  a rapid normalization of monetary policies and started a low-growth, low-investment era.

Highlighting the economic risks the GRPS predicts that the governments and central banks could face stubborn inflationary pressures over the next two years citing a potential for a prolonged war in Ukraine, continued bottlenecks from a lingering pandemic, and economic warfare spurring supply chain decoupling.

The GRPS says that a more prolonged economic downturn and debt distress could be caused by a miscalibration between monetary and fiscal policies  which woukd raise the likelihood of liquidity shocks.

Geopolitical Tensions and Economic Warfare
Citing the risks for the next decade the report said that global economic fragmentation, geopolitical tensions and rockier restructuring could contribute to widespread debt distress in the next 10 years.

The report also highlighted the risk of a stagflation and said a continue in supply-driven inflation, which would then create an unprecedented interaction with historically high levels of public debt.

Economic warfare is becoming the norm,economic policies will increasingly be deployed offensively to constrain the rise of others. As has been already seen in the war between Russia and Ukraine.

The report suggests that intensive geoeconomic weaponization will highlight security vulnerabilities posed by trade, financial and technological interdependence between globally integrated economies.

The report points out that geographic hotspots critical to effective functioning of the global financial and economic system, in particular in the Asia-Pacific will pose a growing concern in the next decade.

Impact on Government and the Individual
Talking about the impact of  the economic crises the report said that even if some economies experience a softer-than-expected economic landing, the end of the low interest rate era is likely to have significant ramifications.

The report emphasised that due to the long-term effects of economic pressures the gains made by middle-income households will be eroded, political polarization and calls for enhanced social protections in countries across the world are also likely to be seen.

Highlighting the challenge the government is likely to face the GRPS said that governments across the world will be caught between protecting citizens from rising prices and meeting debt servicing costs as revenues come under pressure from an economic downturn.

Technological Progress
The GRPS predicts that breakthroughs will be made in the fields of emerging technologies such as advancements in AI, quantum computing and biotechnology, among other technologies. It is likely that the technology sector will be among the central targets of stronger industrial policies and enhanced state intervention.

Growth in the technology sector is also likely to be spurred by state aid and military expenditure, as well as private investment, research and development.

Cyberinsecurity and Technological Threats
The GRPS says nations that won't progress in the field of technology will see a growth in inequality and divergence. Technological advancement will also bring risks, from widening misinformation and disinformation to an unmanageably rapid churn in both blue- and white-collar jobs.

Technological advancements are also likely to create a scope for technology based warfare wherein apart from the rise in cybercrime a rise in attempts to disrupt critical technology-enabled resources and services will become more common.

The report says that attacks  are anticipated against agriculture and water, financial systems, public security, transport, energy and domestic, space-based and undersea communication infrastructure.

Possibility of a 'Polycrises'The report concludes that factors such as concurrent shocks, deeply interconnected risks and eroding resilience are giving rise to the possibility of a 'polycrises' – where disparate crises will interact such that the overall impact far exceeds the sum of each part.

The report predicts that eroding geopolitical cooperation will have ripple effects across the global risks landscape over the medium term, including contributing to a potential polycrisis of interrelated environmental, geopolitical and socioeconomic risks relating to the supply of and demand for natural resources.