Cost of living crisis, digital inequality among risks for India: WEF

World faces unsustainable levels of debt, era of low growth, de-globalization: Report

A cost of living crisis, digital inequality, geopolitical contest for resources, natural disasters and extreme weather events are the biggest risks for India over the short and medium term, said a World Economic Forum report on Wednesday.
 
Globally, over the short-term (2 years), the biggest risks are the cost of living crisis, natural disasters and extreme weather events, geoeconomic confrontation, failure to mitigate climate change and large-scale environmental damage incidents, among others, the report stated. Over a long term (10 years), the biggest risks include failures to mitigate climate change and climate change adaptation, biodiversity loss, large scale involuntary migration, and natural resources crises, amongst others.
 
“As 2023 begins, the world is facing a set of risks that feel both wholly new and eerily familiar. We have seen a return of “older” risks – inflation, cost-of-living crises, trade wars, capital outflows from emerging markets, widespread social unrest, geopolitical confrontation and the spectre of nuclear warfare – which few of this generation’s business leaders and public policy-makers have experienced,” said the World Economic Forum’s Global Risks Report 2023.
 
The report said that these risks were amplified by comparatively new developments in the global landscape, including unsustainable levels of debt, a new era of low growth, low global investment and de-globalization, a decline in human development after decades of progress, rapid and unconstrained development of dual-use (civilian and military) technologies, and the growing pressure of climate change impacts.
 
“Together, these are converging to shape a unique, uncertain and turbulent decade to come,” it said.
 
Geopolitical rivalries and inward-looking stances will heighten economic constraints and further exacerbate both short- and long-term risks, the report said, adding that the pandemic and war in Europe have brought energy, inflation, food and security crises back to the fore.
 
These create follow-on risks that will dominate the next two years: the risk of recession; growing debt distress; a continued cost of living crisis; polarised societies enabled by disinformation and misinformation; a hiatus on rapid climate action; and zero-sum geo-economic warfare, it added.
 
“The economic aftereffects of COVID-19 and the war in Ukraine have ushered in skyrocketing inflation, a rapid normalization of monetary policies and started a low-growth, low-investment era.”
 
“The inflation that we have seen due to the commodity price spike, and the support given in advance economies to keep businesses afloat, it wasn’t perfect. Things look grim in the advanced economies, with fears of recession. But many small businesses and people stayed afloat,” said Saadia Zahidi, Managing Director of WEF.
 
Beyond the short term, climate change is the biggest risk that the global economy faces, and it is the challenge for which humanity is least prepared, the report stated.
 
“Nature loss and climate change are intrinsically interlinked – a failure in one sphere will cascade into the other. Without significant policy change or investment, the interplay between climate change impacts, biodiversity loss, food security and natural resource consumption will accelerate ecosystem collapse, threaten food supplies and livelihoods in climate-vulnerable economies, amplify the impacts of natural disasters, and limit further progress on climate mitigation,” it said.
 
Food, fuel and cost crises have exacerbated societal vulnerabilities. Compounding crises have widened their impact across societies, hitting the livelihoods of a far broader section of the population, and destablizing more economies in the world, than traditionally vulnerable communities and fragile states.
 
Economic impacts have been cushioned by countries that can afford it, but many lower-income countries are facing multiple crises: debt, climate change and food security. Continued supply-side pressures risk turning the current cost-of living crisis into a wider humanitarian crisis within the next two years in many import-dependent markets, the report said, adding that social unrest and political instability will not be contained only to emerging markets, but may hit developed economies as well.

10 Biggest global risks as per WEF

Short Term (2 Years)	Long Term (10 Years)
Cost of Living Crisis	Failure to Mitigate Climate Change
Natural Disasters & Extreme Weather Events	Failure of Climate Change Adaptation
Geoeconomic Confrontation	Natural Disasters & Extreme Weather Events
Failure to Mitigate Climate Change	Biodiversity Loss & Ecosystem Collapse
Societal Polarization	Large-scale Involuntary Migration
Large-scale Environmental Damage	Natural Resources Crises
Failure of Climate Change Adaptation	Societal Polarization
Widespread Cybercrime	Widespread Cybercrime
Natural Resources Crises	Geoeconomic Confrontation
Large-scale Involuntary Migration	Large-scale Environmental Damage

Source: WEF’s Global Risks Report 2023