JOHANNESBURG - While the world seems to be getting back on track ten years after the global financial crisis, the thirteenth edition of the Global Risks report 2018 reveals that the positive headline economic indicators mask numerous concerns.
The World Economic Forum (WEF) report, tabling a new question to gauge expectations for this year, found that only 7% of respondents point to a reduction of risk, compared with 59% pointing to an increase, with persistent inequality and unfairness, domestic and international political tensions, environmental dangers and cyber-vulnerabilities highlighted as concerns.
Following a year of widespread uncertainty, instability and fragility, global economic recovery is under way, offering new opportunities for progress, higher stock markets, gross domestic product growth and the unwinding of “exceptional” policies by the world’s major banks.
However, the WEF warned that the positive outlook masked underlying concerns and economic and financial risk “blind spots”, meaning that business leaders and policy-makers could be less prepared than they should be for serious economic or financial turmoil.
“This has been the weakest post-recession recovery on record. Productivity growth remains puzzlingly weak. Investment growth has been subdued, and in developing economies it has slowed sharply since 2010. And in many countries the social and political fabric has been badly frayed by many years of stagnating real incomes,” the WEF explained.
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The global economy faces a mix of long-standing vulnerabilities and newer threats that have emerged or evolved in the years since the crisis.
The familiar risks include potentially unsustainable asset prices, with the world now eight years into a bull run; elevated indebtedness, particularly in China; and continuing strains on the global financial system.
“Among the newer challenges are limited policy firepower in the event of a new crisis; disruptions caused by intensifying patterns of automation and digitalisation; and a build-up of mercantilist and protectionist pressures against a backdrop of rising nationalist and populist politics,” the report noted.
Against this backdrop, the world has moved into a new and unsettling geopolitical phase.
“There is currently no sign that norms and institutions exist towards which the world’s major powers might converge. This creates new risks and uncertainties: rising military tensions, economic and commercial disruptions, and destabilising feedback loops between changing global conditions and countries’ domestic political conditions.”
The WEF added that international relations now played out in increasingly diverse ways.
In addition, the new report points to the increased dangers of systemic breakdown – the first generation to do so.
“The urgency of facing up to systemic challenges has, if anything, intensified amid proliferating indications of uncertainty, instability and fragility,” it added, noting that the acceleration and interconnectedness in every field of human activity are pushing the absorptive capacities of institutions, communities and individuals to their limits.
Humanity faces a growing number of systemic challenges, including fractures and failures affecting the environmental, economic, technological and institutional systems “on which our future rests”.
“This generation enjoys unprecedented technological, scientific and financial resources, which we should use to chart a course towards a more sustainable, equitable and inclusive future,” the report pointed out.
While there are many signs of progress and many reasons for hope, there is still a lack of momentum and the necessary depth of collaboration to deliver change on the scale required.