SA’s top executives have identified state collapse, debt crises and the total failure of services and public infrastructure as top issues of concern for 2023 in the World Economic Forum’s (WEF’s) annual Global Risks Perception Survey.
Released on Wednesday, the executive opinion survey, an attachment to the World Economic Forum’s Global Risks Report, noted the cost of living crisis as well as the employment and livelihood crises as further risks.
The survey presents a list of 35 risks on a more granular level to reflect the possible short-term and country-level manifestations of global risk.
More than 12,000 respondents were presented with this question: “Which five risks are the most likely to pose the biggest threat to your country in the next two years?” over the six months April to September.
The WEF’s Global Risks Report looks at the backdrop of simmering geopolitical tension and confluence of socioeconomic risks. It identifies the most severe perceived risks to economies and societies over the next two years.
Forum MD Saadia Zahidi said the world’s collective focus is being channelled into the “survival” of today’s crises, which include the cost of living, social and political polarisation, food and energy supplies, tepid growth, and geopolitical confrontation,
She said social and political polarisation may also further reduce the space for collective problem-solving to address global risk.
“National elections will take place in several G20 countries within the next two years, including the US, SA, Turkey, Argentina, Mexico and Indonesia,” Zahidi said. “The election of less-centrist leaders and adoption of more extreme policies in economic superpowers may fracture alliances, limit global collaboration and lead to a more volatile dynamic.”
Another issue raised in the report is the rising cost of debt. Some developing and emerging markets are feeling the effect of tightening monetary policy and deteriorating economic conditions first and most acutely.
Ghana recently reached an agreement with the IMF regarding a $3bn bailout, while Zambia looks to conclude restructuring of $15bn in external debt early this year.
“A broad-based global recession within the year could temper inflation and cap interest rate rises, but there is a higher risk of balance-of-payments crises in the short-term, alongside a credit crunch over the mid to longer term,” said Zahidi.
She said downside risks loom large. Another global shock could result in deeper and more prolonged economic disorder.
Stagflation also remains a severe risk for many economies. Stagflations refers to a high inflation, low economic growth environment.
The report said continued tightness in major labour markets may worsen wage inflation, meaning there may have to be a material rise in unemployment to contain consumer inflation.
“Extended supply driven inflation could drive more painful interest rate rises, even amidst a slowdown in growth, leading to a harder landing and more widespread debt distress,” said Zahidi. “The more systemically important emerging and developing economies — the likes of Mexico, SA and Poland — could face distress in coming years, raising the risk of financial contagion.”
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