The cost of living crisis is the biggest global risk in the next two years, the World Economic Forum warned Wednesday in a survey ahead of the annual Davos meeting of global elites.
The WEF report describes the cost of living crisis as the “biggest short-term risk” between now and 2025, followed by natural disasters, extreme weather events and “geo-economic confrontation”.
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Global inflation remains at high levels after energy and food costs rocketed last year, largely due to the invasion of Ukraine’s agricultural power plants by major oil and gas producers Russia.
Living expenses and paying off debt
The limited supply caused by the Covid pandemic has also led to high prices for consumers.
“Conflicts and geo-economic tensions have triggered a series of deeply interconnected global risks,” said the annual study ahead of next week’s gathering in the Swiss Alpine village of Davos.
“This includes energy and food supply crunches, which are likely to continue for the next two years, and strong increases in the cost of living and debt service,” he added.
The report said that “the risk crisis is 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, recorded the views of more than 1,200 global risk experts, policy makers and industry leaders.
“The short-term risk landscape is dominated by energy, food, debt and disasters,” said Saadia Zahidi, managing director of the WEF.
“Those who are already most vulnerable suffer – and in the face of multiple crises, those who are most vulnerable are growing rapidly, in both rich and poor countries,” he wrote in the report.
– ‘Change the risk of war’ –
In a press conference in London on Wednesday, Zahidi highlighted the fact that respondents in the survey placed traditional wars as less of a risk than geo-economic conflicts – such as sanctions, punitive tariffs and other trade wars – or cyber wars.
“The nature of how conflicts happen has changed,” she said.
“This does not mean that we should not worry, because for the first time in quite a long time, military spending has been seen to be low but pronounced in many large economies.”
The WEF study called on leaders to act “together and decisively, balancing short-term and long-term views”.
Also read: Consumers should prepare for more rate hikes until a significant drop in inflation
And ended in the need for cooperation to strengthen “financial stability, technological governance, economic development and investment in research, science, education and health”.
Carolina Klint, head of risk management at Marsh, said this year will be marked by “increased risks” related to food, energy, raw materials and cyber security that could disrupt global supply chains and impact investment decisions.
“At a time when countries and organizations need to work on resilience, economic problems will hinder their ability,” he wrote in the report.
Many analysts warn that the global economy will experience a recession in 2023 as inflation continues to rise.
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Also read: Consumer confidence rises again, but no good outlook for 2023