Global economy on shaky ground

The
global economy is “in no position to face major new shocks”,
according to the World Economic Forum (WEF).

Its
Global Risks 2011 report warns that economic imbalances, volatile commodity
prices and currencies, and governments’ budget shortfalls are “unsustainable”.

Rapid
population growth is another risk, pushing up demand for food, water and energy
by 30-50 per cent by 2030.

The
WEF warns that there is no sign of governments agreeing on how to achieve
sustainable economic growth worldwide.

The
Global Risks report was published in the run-up to the forum’s annual meeting
in Davos at the end of January, which normally attracts more than 2,000 of the
world’s top business and political leaders.

The
report identifies three clusters of risk: the world economy, suffering in
the aftermath of the financial crisis and weakened by budget deficits and the
cost of ageing populations; the illegal economy driven by corruption, organised
crime, illicit trade and failed states; and the every growing demand for resources
such as water, food and energy.

The
authors, drawn from a global network of business and political leaders, try to
map how a single problem in each cluster can quickly escalate and cause a wider
crisis affecting other areas.

Robert Greenhill, chief business
officer at the WEF, said that while it had taken months for the Wall Street
crash of 1929 to affect the rest of the world, it took only minutes for the
crash of 2008 to make an impact.

The report speaks of “rapid contagion
through increasingly connected systems and the threat of disastrous
impacts” on fragmented societies where economic imbalances undermine
social cohesion.

The
WEF report, one of the gloomiest in recent years, warns that while nationalism
is on the rise, there is also a “growing divergence of opinion between
countries on how to promote sustainable, inclusive growth”.

BUZglobaleconomySTORY

Weakened countries find it more difficult to deal with a crisis.
Photo: File
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