WEF report forecasts gloomy decade

Fragile economies and extreme weather have combined to crank up the global risk dial over the past year, creating an increasingly dangerous mix, according to the World Economic Forum (WEF).

Despite Europe’s avoidance of a euro zone breakup last year and the US stepping back from its fiscal cliff, business leaders and academics worry that politicians are failing to address fundamental problems.

That is the conclusion of the group’s Global Risks 2013 report, which surveyed more than 1 000 experts and industry bosses and found that they were slightly more pessimistic about the outlook for the decade ahead than they were a year ago.

“It reflects a loss of confidence in leadership from governments,” said Lee Howell, the WEF managing director.

Severe wealth gaps and unsustainable government finances were seen as the biggest economic threats facing the world – as they were last January – and there was a marked increase in focus on the dangers posed by severe weather.

The 80-page analysis of 50 risks for the next 10 years comes ahead of the WEF annual meeting in the Swiss ski resort of Davos from January 23 to 27, where the rich and powerful will ponder the planet’s future.

Bringing together business leaders, politicians and central bankers, Davos has come to symbolise the modern globalised world dominated by successful multinational corporations.

Chief executives arriving on their private jets may still ooze confidence but “Davos man” – and most delegates are male – has plenty to worry about these days.

Concerns about rising greenhouse gas emissions have grown notably in the past 12 months. The issue is ranked the third-biggest worry overall, while failure to adapt to climate change is viewed as the biggest single environmental hazard.

Superstorm Sandy, which wreaked havoc on the US east coast last October, was a wake-up call for many.

Extreme weather was on display again this week as Australia grappled with fires and heatwave conditions, while temperatures in China plunged to a 28-year low.

“Two storms – environmental and economic – are on a collision course,” said John Drzik, the chief executive of Oliver Wyman, a unit of insurance broker Marsh & McLennan, as the WEF report was launched yesterday.

“If we don’t allocate the resources needed to mitigate the rising risk from severe weather events, global prosperity for future generations could be threatened,” he said.

This year’s Davos meeting takes as its theme “resilient dynamism”, in recognition of the need for governments and businesses to develop strategies to ensure critical systems continue to function in the face of such threats. – Ben Hirschler in London for Reuters