WEF Warns Rising Cost of Living, Climate Change Constitute Biggest Risks to Global Economy

•Says COVID-19, others eroding economic gains

James Emejo in Abuja

The World Economic Forum (WEF) yesterday warned that the cost of living crisis remained the biggest short-term risk to the global economy.

The forum, in its Global Risks Report 2023  which was released ahead of its Annual Meetings in Switzerland, also pointed out that the failure of climate mitigation and adaptation remained the largest long-term concern.

The report noted that geopolitical rivalries and inward-looking stance would heighten economic constraints and further exacerbate both short- and long-term risks to the global outlook.

The report further urged countries to work together to avoid “resource rivalries”.

WEF’s Managing Director, Saadia Zahidi, said, “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.

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

Also, commenting on the report, Head of Sustainability Risk, Zurich Insurance Group, John Scott, said, “The interplay between climate change impacts, biodiversity loss, food security, and natural resource consumption is a dangerous cocktail. Without significant policy change or investments, this mix will accelerate ecosystem collapse, threaten food supplies, amplify the impacts of natural disasters and limit further climate mitigation progress.

“If we speed up action, there is still an opportunity by the end of the decade to achieve a 1.5^oC degree trajectory and address the nature emergency. Recent progress in the deployment of renewable energy technologies and electric vehicles gives us good reasons to be optimistic.”

On his part, Risk Management Leader, Continental Europe, Marsh, Carolina Klint, stated that “2023 is set to be marked by increased risks related to food, energy, raw materials, and cyber security, causing further disruption to global supply chains and impacting investment decisions.

“At a time when countries and organizations should be stepping up resilience efforts, economic headwinds will constrain their ability to do so.

“Faced with the most difficult geo-economic conditions in a generation, companies should focus not just on navigating near-term concerns but also on developing strategies that will position them well for longer-term risks and structural change.”

For the past 17 years the WEF’s Global Risks Report has warned about deeply interconnected global risks as conflict and geo-economic tensions have triggered a series of deeply interconnected global risks.

The report further noted that energy and food supply crunches are likely to persist for the next two years, warning of strong increases in the cost of living and debt servicing.

The forum also noted that the crises risk undermining efforts to tackle longer-term risks, notably those related to climate change, biodiversity, and investment in human capital.

It stressed that the window for action on the most serious long-term threats is closing rapidly and concerted, stressing that collective action is needed before risks reach a tipping point.

According to the report: “While ongoing shocks unfold, the world stands at a crossroads. As we enter a low-growth, low- investment, and low-cooperation era, the actions that we take today will dictate our future risk landscape.

“We must ensure that addressing current crises does not detract from the longer-term view.”

It noted that “Recent and current events such as COVID-19 and the cost-of-living crises are steadily eroding economic, educational and health-related gains in a widening proportion of the population, with a growing divergence between advanced and developing countries.”