Global economy faces ‘consistent volatility’ as Covid fuels inequalities, WEF warns

The world economy faces “constant volatility and multiple surprises” over the next three years as vaccine inequality and a Covid-induced widening the income gap between the richest and poorest countries stoke geopolitical tension, according to the World Economic Forum (WEF).

This will threaten cooperation on some of the biggest global challenges in the future, such as climate change, the WEF said in its latest annual Global Risks Report, based on a survey of about 1,000 experts, policymakers and industry leaders.

The publication of the report is normally a set-piece annual event before the WEF gathers international political and business leaders in Davos. However, it was forced in December to defer its planned assembly this month to the summer, amid concerns over the coronavirus Omicron variant.

Risks

The last time world leaders congregated in the Swiss Alpine town was for the WEF's 50th meeting in January 2020, before Covid-19 spread across the world.

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Almost 28 per cent of respondents to the latest survey said they believe that social cohesion has weakened as a result of the pandemic, topping the list of risks that have grown in the past two years. Livelihood crises, climate action failure, and mental health deterioration round off the top four risks that have worsened.

“As 2022 begins, Covid-19 and its economic and societal consequences continue to pose a critical threat to the world,” according to the report. “Vaccine inequality and a resultant uneven economic recovery risk compounding social fractures and geopolitical tensions. In the poorest 52 countries-

home to 20 per cent of the world’s people-only 6 per cent of the population had been vaccinated at the time of writing.”

By 2024, developing economies, excluding China, will have fallen 5.5 per cent below their pre-pandemic expected gross domestic product (GDP) growth, while growth, while advanced economies will have surpassed it by 0.9 per cent, the report forecast.

This will further widen the global income gap.

“The resulting global divergence will create tensions- within and across borders-that risk worsening the pandemic’s cascading impacts and complicating the coordination needed to tackle common challenges including strengthening climate action, enhancing digital safety, restoring livelihoods and societal cohesion, and managing competition in space,” the report said.

Outlook

Over 84 per cent of respondents said that they were either “worried” or “concerned” about the general outlook for the world.

Almost 42 per cent expected “constant volatility with multiple surprises” over the next three years as the globe recovers from the worst of the pandemic, while 37.4 per cent said that the world will follow “fractured trajectories” over the period, which will separate relative winners and losers.

“For the next five years, respondents again signal societal and environmental risks as the most concerning,” the report said. “However, over a 10-year horizon, the health of the planet dominates concerns: environmental risks are perceived to be the five most critical long-term threats to the world as well as the most potentially damaging to people and planet.”