The world is facing the increased risk of political confrontations between major powers, which is hindering solutions to challenges like climate change and cyberattacks, a new report by the World Economic Forum (WEF) said Wednesday.
WEF, best known for creating and facilitating its annual economic forum in Davos, Switzerland, said the breakdown of international cooperation on major issues had reached “crisis levels,” and would continue to prevent international action on urgent crises this year.
The WEF report, called the Global Risks Report 2019 and released with risk consultancy Marsh, surveyed around 1,000 experts and decision-makers with 90 percent saying they expected further economic confrontation between major powers. Eighty-eight percent said they expected further erosion of multilateral trading rules.
“Lots of populist political figures are getting elected and changing the agenda to be more protectionist (and) more nationalist, and as a result (they are) weakening multilateral bonds — and that’s expected to continue into 2019,” John Drzik, president of global risk and digital at Marsh, told CNBC’s “Street Signs Europe.”
“Not only will geopolitical tensions continue, but they will grow in the economic sphere in the form of tariffs, sanctions, further trade wars, investment restrictions, restrictions on the use of technology from a foreign country, and all of these tend to have a depressing impact on the economy.”
The report also speculated risks would arise from a “multiconceptual” world order — where geopolitical instabilities reflected a shift in power balances as well as disagreements on fundamental values.
“With global trade and economic growth at risk in 2019, there is a more urgent need than ever to renew the architecture of international cooperation,” said WEF President Borge Brende in a press release on Wednesday.
“We simply do not have the gunpowder to deal with the kind of slowdown that current dynamics might lead us towards. What we need now is coordinated, concerted action to sustain growth and to tackle the grave threats facing our world today.”
When it came to a more long-term outlook, issues including extreme weather events, failure of climate-change mitigation and adaptation, and natural disasters were named as both high-impact and high-likelihood risks.
The theme of geopolitical tension was also detected as a global threat to business in Allianz’s 2019 Risk Barometer, published on Tuesday.
Allianz’s survey of global companies found that business interruption — arising from issues such as new tariffs and trade disputes — was the biggest threat to firms worldwide. Changes in legislation and regulation — arising from issues such as Brexit — were also seen as a threat, with almost a third of companies citing it as a concern.
Ludovic Subran, the deputy chief economist for Allianz, told CNBC via email that the U.S.’s end-of-year trade truce with China was only postponing the growing U.S.-China rivalry.
“Some countries have beefed up anti-acquisition legislations, others fear further sanctions. Supply chains are at risk, and trade diversion starts to be a conversation in the boardroom to avoid negative effects of the new trade regime,” he said.
“In 2019, risks loom for Europe with tense elections, fewer growth prospects for the euro zone and Brexit fatigue. What looks like a soft landing could become a forced landing if negative political outcomes and surprising regulatory moves spook investors and companies.”
