Cost-of-living crisis poses biggest short-term threat, finds WEF’s Global Risks Report 2023

DUBAI: As the world returns to a new normal after the global COVID-19 pandemic, the war in Ukraine is wreaking havoc on global supply chains resulting in energy, inflation, food and security crises, according to the World Economic Forum’s latest Global Risks Report.

The impact of these crises will be felt over the next two years exacerbating the cost-of-living crisis, increasing the risk of recession, growing debt distress, and polarizing societies due to disinformation and misinformation.

The report argues that the window for action on the most serious long-term threats is closing rapidly and calls for collective action before the risks reach a tipping point.

The cost-of-living crisis, natural disasters and extreme weather events, and geoeconomic confrontation, are the top three short-term risks, according to the report.

However, environmental concerns are growing rapidly, with the failure to mitigate climate change, the lack of climate change adaptation, and natural disasters and extreme weather ranking as the top three long-term risks over the next 10 years.

“The short-term risk landscape is dominated by energy, food, debt and disasters. Those that are already the most vulnerable are suffering — and in the face of multiple crises, those who qualify as vulnerable are rapidly expanding, in rich and poor countries alike,” said Saadia Zahidi, managing director of the WEF.

This year’s report also examines how present and future risks can interact with each other to form a “polycrisis,” which is a cluster of related global risks with compounding impacts and unpredictable consequences.

Due to the uncertainty of relationships between global risks, the report suggests foresight exercises, which can help anticipate potential connections in order to set measures that can minimize the scale and scope of polycrises before they arise.

The report also recommends urgent and coordinated climate action, as well as joint efforts between countries and public-private cooperation to strengthen financial stability, technology governance, economic development and investment in research, science, education and health.

“In this already toxic mix of known and rising global risks, a new shock event, from a new military conflict to a new virus, could become unmanageable,” said Zahidi.

She added: “Climate and human development therefore must be at the core of concerns of global leaders to boost resilience against future shocks.”

The Global Risks Report 2023, part of the WEF’s Global Risks Initiative, was produced in partnership with Marsh McLennan and Zurich Insurance Group and draws on the views of over 1,200 global risk experts, policymakers and industry leaders.

The upcoming 53rd edition of the WEF Annual Meeting, held under the theme “Cooperation in a Fragmented World,” comes amid tensions rising over several growing crises and the fragmentation of the geopolitical landscape.

Taking place from Jan. 16-20 in Davos-Klosters, Switzerland, the annual meeting will host over 2,700 leaders from 130 countries and will see the highest-ever business participation, with over 1,500 leaders registered across 700 organizations.