The World Economic Forum issues a threat of a “polycrisis”

Date:

The World Economic Forum issues a threat of a "polycrisis"

  • news by AUN News correspondent
  • Thursday, January 12, 2023
  • AUN News – ISSN: 2949-8090

Summary:

  • Before its annual Davos conference, the World Economic Forum warns that the cost of living is the biggest short-term risk to the world economy and that food and energy prices are likely to keep going up for the next two years.

  • Droughts and water shortages may cause a decline in harvests and livestock deaths across East Africa, North Africa and Southern Africa, exacerbating food insecurity, says the report. 

  • When the report came out, the managing director of the World Economic Forum, Saadia Zahidi, said that disasters, debt, food, and energy were the most significant short-term risks.

  • World leaders must put climate change and human development at the top of their concerns to make their countries more resilient to future shocks.

  • This could lead to a multicrisis of interconnected environmental, geopolitical, and socioeconomic risks related to the supply and demand of natural resources.

Before its annual Davos conference, the World Economic Forum warns that the cost of living is the biggest short-term risk to the world economy and that food and energy prices are likely to keep going up for the next two years.

The World Economic Forum’s Global Risks Report 2023, which policymakers must read before their January 16 meeting in a Swiss resort, says that the world can’t ignore long-term problems if it wants to avoid “polycrises,” which happen when other crises interact and have an effect that is much worse than the sum of their separate products.

The WEF report was made with the help of Marsh & McLennan and Zurich Insurance Group. It was written by more than 1,200 global risk experts, policymakers, and business leaders.

Prepare for Davos 2023.

Recession risk, mounting debt burden, the ongoing cost of living crisis…

The pandemic and the conflict in Russia and Ukraine have brought on global inflation and rising energy, food, and security prices. The report’s authors say that the next two years will be dominated by the risks of a recession, a growing debt crisis, a continuing cost of living crisis, polarized societies fueled by misinformation and disinformation, a pause in quick action on climate change, and zero-sum geo-economic warfare.

The authors say governments and central banks may have to deal with persistent inflationary pressures over the next two years. On top of that, there is a chance of a long-lasting war in Ukraine, ongoing pandemic bottlenecks, and breaks in the supply chain caused by economic warfare.

“Economic downside threats also remain significant.” If monetary policy and fiscal policy are not in sync, there will be a higher chance of liquidity shocks, which could lead to a longer-lasting economic slump and a global debt crisis. Continued supply-driven inflation could lead to stagflation, which could seriously affect society if it happens for the first time and interacts with historically high public debt levels.

“In the next ten years, debt crises could happen worldwide because of geopolitical unrest, the breakup of the global economy, and more difficult restructuring.” Even if some countries’ economies recover more slowly than expected, the end of the low-interest rate period will greatly impact governments, businesses, and people.

Droughts and water shortages may cause a decline in harvests and livestock deaths across East Africa, North Africa and Southern Africa, exacerbating food insecurity, says the report. (Photo: Riccardo Niels Mayer / Adobe Stock)

Those who are suffering the most

According to the research, short-term crises could make it harder to deal with unexpected and expected long-term risks, especially those related to climate change, biodiversity, and investments in human capital.

When the report came out, the managing director of the World Economic Forum, Saadia Zahidi, said that disasters, debt, food, and energy were the most significant short-term risks.

“Those who are already the most vulnerable are suffering.” In the face of numerous crises, the number of people who meet the criteria for vulnerability is rising quickly in both rich and developing nations. In this already dangerous mix of known and worsening global threats, a new shock event like a new military conflict or virus could make things too hard to handle. World leaders must put climate change and human development at the top of their concerns to make their countries more resilient to future shocks.

The “polycrises” spectre

The authors say that polycries could happen if many threats are on the rise at the same time.

“The risk of polycystic kidney disease is increasing because of multiple shocks, risks linked to each other, and weakening resilience… Over the next few years, declining geopolitical cooperation will affect the global risk picture. This could lead to a multi-crisis of interconnected environmental, geopolitical, and socioeconomic risks related to the supply and demand for natural resources.

Being unable to deal with the current economic problems, in particular, could make it very hard for the world to fight climate change.

Governments must make difficult decisions to balance competing interests for society, the environment, and security in the upcoming years. The authors say that short-term geo-economic threats have already put net-zero promises to the test and shown that what is politically acceptable and scientifically necessary are not the same.

Interconnected environmental, geopolitical, and socioeconomic risks affect the supply and demand for natural resources. The report looks at how unresolved tensions could lead to resource wars.

The authors say that in the best case, sharing resources could lead to flexible supply chains and effective climate action plans that would reduce the effects of climate change on food production. But in the worst-case scenario, food and water shortages caused by climate change could happen at the same time as competition for essential metals and minerals. This could lead to “a truly global, multi-resource crisis with widespread socio-economic effects that are greater in scope and scale than those seen in other futures, including famine and water refugees.”

Demanding effective group action

The report urges decision-makers to address immediate and long-term issues jointly and forcefully.

WEF’s Zahidi says that all of the world’s attention is on the cost of living, social and political polarization, food and energy supply, slow development, geopolitical conflict, and other problems.

The report says, “Yet, much-needed resources are being taken away from new or quickly growing threats to human health, security, digital rights, and economic stability that could turn into crises and disasters in the next ten years.”

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