London - The chronic gap between rich and poor was yawning wider, posing the biggest single risk to the world this year, even as economies in many countries started to recover, the World Economic Forum (WEF) said yesterday.

Its annual assessment of global dangers, which will set the scene for its meeting in Davos next week, concludes that income disparity and attendant social unrest are the issues most likely to have a big impact on the world economy in the next decade.

The forum warned there was a “lost” generation of young people coming of age in the 2010s who lacked both jobs and, in some cases, adequate skills for work, fuelling pent-up frustration.

This could easily boil over into social upheaval, as seen already in a wave of protests over inequality and corruption from Thailand to Brazil.

“Disgruntlement can lead to the dissolution of the fabric of society, especially if young people feel they don’t have a future,” Jennifer Blanke, the WEF’s chief economist, said. “This is something that affects everybody.”

The survey of more than 700 global experts identified extreme weather events as the second most likely factor to cause systemic shocks, reflecting a perceived increase in severe conditions such as the US’s big freeze this winter.

The risk of precarious government finances triggering fiscal crises remained the hazard with the potential to have the biggest economic impact, but the likelihood of such fiscal blow-ups was lower now than in previous years, it said.

Europe is out of the immediate financial danger zone – a fact that has helped income inequality to rise up the agenda, according to David Cole, the head of risk at Swiss Re, who worked on the report.

Increasing public attention on inequality, which had in fact been trending upwards since the 1980s, would require policymakers and the global elite to tread carefully, he said.

“I’m a big supporter of capitalism but there are moments in time when capitalism can go into overdrive and it is important to have measures in place – whether regulatory, government or tax measures – that ensure we avoid excesses in terms of income and wealth distribution,” Cole said.

So far, the massive fiscal and monetary stimulus that has helped stabilise and revive economies has had little impact on the poor, the unemployed and the younger generation.

In the West, the WEF said, young people were graduating from “expensive and outmoded” schools and colleges with high debts and the wrong skills, while in developing countries around two-thirds of them were not reaching their economic potential.

The 60-page report analyses 31 global risks for the next 10 years and comes ahead of the WEF’s annual meeting in the Swiss ski resort of Davos from January 22 to 25, where the rich and powerful will ponder the planet’s future.

Bringing together business leaders, politicians and central bankers, Davos now symbolises the modern globalised world dominated by successful multinational corporations.

The theme this year is “The Reshaping of the World: Consequences for society, politics and business”. – Ben Hirschler from Reuters