COVID-19 pandemic increasing disparities, social fragmentation; threatening economy, geopolitical stability: WEF study

By: |
January 19, 2021 5:04 PM

The report further said financial, digital and reputational pressures resulting from COVID-19 also threaten to leave behind many companies and their workforces in the markets of the future.

coronavirus impact on global economiesAs governments, businesses and societies begin to emerge from the pandemic, they must now urgently shape new economic and social systems.

The COVID-19 pandemic has not only claimed millions of lives, it is also increasing disparities and social fragmentation, while it will threaten the economy in the next 3-5 years and will weaken geopolitical stability over the next 5-10 years, a study showed on Tuesday,

In its annual Global Risks Report, the World Economic Forum (WEF) also termed ‘infectious diseases’ as the biggest risk in terms of impact for the next decade, while ‘extreme weather’ tops the chart for risks in terms of likelihood.

The report, released ahead of the virtual ‘Davos Agenda’ summit of the WEF from January 25-29 that would be attended by Prime Minister Narendra Modi among other global leaders, said the world needs to wake up to long-term risks, after witnessing in 2020 the catastrophic effects of ignoring long-term risks such as pandemics, which is now an immediate risk.

The WEF said its Global Risks Report has been warning the world for the last 15 years about the dangers of pandemics.

“In 2020, we saw the effects of ignoring preparation and ignoring long-term risks. The COVID-19 pandemic has not only claimed millions of lives, but it also widened long-standing health, economic and digital disparities,” it said.

Billions of caregivers, workers and students — especially minorities who were disadvantaged before the pandemic — are now at risk of missing pathways to the new and fairer societies that the recovery could unlock, the report said.

These developments may further impede the global cooperation needed to address long-term challenges such as environmental degradation, it added.

When it comes to technology access and digital skills, the gap between the ‘haves’ and the ‘have nots’ risks widening and challenging social cohesion. This will particularly affect young people worldwide, as this group faces its second global crisis in a generation and could miss out altogether on opportunities in the next decade, the report said.

Among geopolitical risks facing the world, the report also referred to “increasing tensions between China and India”, saying it could weaken regional and global trade and growth with China expanding its regional economic interests through the recently signed Regional Comprehensive Economic Partnership (RCEP).

The report further said financial, digital and reputational pressures resulting from COVID-19 also threaten to leave behind many companies and their workforces in the markets of the future.

“While these potential disparities could cause societal fragmentation for states, an increasingly tense and fragile geopolitical outlook will also hinder the global recovery if mid-sized powers lack a seat at the global table,” the WEF said.

Besides, environmental risks continue to dominate by impact and likelihood for the next decade, while societal fractures, uncertainty and anxiety will make it more difficult to achieve the coordination needed to address the planet’s continued degradation.

For the first time, the report also rates risks according to when respondents perceive they will pose a critical threat to the world.

Clear and present dangers (0-2 years) reveal concern about lives and livelihoods — among them infectious diseases, employment crises, digital inequality and youth disillusionment.

In the medium-term (3-5 years), respondents believe the world will be threatened by knock-on economic and technological risks, which may take several years to materialize — such as asset bubble bursts, IT infrastructure breakdown, price instability and debt crises.

Existential threats (5-10 years) — weapons of mass destruction, state collapse, biodiversity loss and adverse technological advances — dominate long-term concerns, the WEF said.

“In 2020, the risk of a global pandemic became reality, something this report has been highlighting since 2006. We know how difficult it is for governments, businesses and other stakeholders to address such long-term risks, but the lesson here is for all of us to recognize that ignoring them doesn’t make them less likely to happen,” said Saadia Zahidi, Managing Director at the WEF.

As governments, businesses and societies begin to emerge from the pandemic, they must now urgently shape new economic and social systems that improve our collective resilience and capacity to respond to shocks while reducing inequality, improving health and protecting the planet, she said.

To help meet this challenge, the next week’s Davos Agenda summit will mobilise global leaders to shape the principles, policies and partnerships needed in this new context, Zahidi added.

Do you know What is Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget, Customs Duty? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1RBI remains net buyer of US dollar in December, buys USD 10.014 billion
2GST collections top Rs 1 lakh crore for 5 months in a row, rise 7% in February
3Manufacturing activities slightly ease in Feb; firms upbeat on demand spike: Survey