A customer hands over an Egyptian pound banknote for a purchase at Al-Monira food market in the Imbaba district of Giza, Egypt, in January 2023. Egypt is one of many countries where consumers are struggling with sharply higher prices, highlighted by the World Economic Forum as the greatest global risk in 2023.
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The World Economic Forum’s annual Global Risks Report highlights the cost of living crisis as the biggest short-term risk facing the world right now, with climate change as the biggest long-term threat.
The report, which has been published ahead of the Davos summit for the last 17 years, factors the views of 1,200 figures across the private and public sectors.
This year’s edition — produced with professional services firm Marsh McLennan and Zurich Insurance Group — said that Russia’s war in Ukraine and the Covid-19 pandemic had propelled the energy crisis, food scarcity and inflation as the most pressing global issues.
“We’re looking at something that feels new, but at the same time eerily familiar,” Carolina Klint, risk management leader for Continental Europe at Marsh, told CNBC’s Joumanna Bercetche.
“So we see a return of some older risks that we felt we had made good progress in terms of solving, but are now very much back on the risk map.”
The impact of the cost of living crisis on vulnerable populations are “very difficult to accept,” Klint said.
“Governments are now really working towards mitigating that impact, at the same time as they’re trying to protect from spiralling inflation and servicing historically high debt loads.”
The report says the world must collaborate more effectively on climate mitigation and adaptation over the next decade to avoid “ecological breakdown” and continued global warming.
It adds that governments will face “trade offs” in the coming years, as societal challenges, the environment and security risks compete for their attention.
The most-cited two-year term risks included natural disasters, geoeconomic confrontation, the erosion of social cohesion, widespread cybercrime, large-scale involuntary migration and natural resource crises, alongside climate change.
Cybercrime and migration also featured as long-term risks, though climate-related issues took the top four spots. The cost of living was absent from the list.
“I would interpret it as a bit of optimism that we’ll be able to navigate out of this stress that we’re in currently, which is the result of a compounding crisis,” Klint said. “It’s an effect of the Covid-19 pandemic, but also, of course, the impact of Russia-Ukraine, which has had a spillover effect on so many different areas.”
The World Economic Forum Davos summit begins on Jan. 16 with the tagline “cooperation in a fragmented world.”