Everything We Need to Know About Global Economic Risk

The World Economic Forum (WEF) just published its Global Risks Report 2020. The goal was to identify and rank what could go wrong so we can consider the solutions. WEF lets us know that their chief concerns, shown by the green diamonds (below), are climate action failure and extreme weather:

Global Economic Risk

But since our lens is economic, let’s go to our economic risks. You can see that the impact (y-axis) and likelihood (x-axis) of unemployment, fiscal crises, and asset bubbles top their list of concerns:

The WEF believes that the world has been shifting toward a weaker problem solving framework. Too many of the G-20 have high debt and diminished growth. A unilateral bias has replaced our multilateral framework. Ranging from flexible monetary policy to free trade, global institutions have disintegrated. Consequently,  economic confrontation was the #1 geopolitical risk among the “multistakeholders” who responded to the WEF survey. The other group of participants, the “global shapers” also ranked it high.

The following three charts show less trade, more debt, and less business confidence.

When trade shrinks, markets contract, and we benefit less from the synergy of working together. David Ricardo called it comparative advantage:

Increasing government debt signals less fiscal flexibility:

Finally, moving to the intangibles, we can cite the confidence that legendary economist John Maynard Keynes said we needed to boost business activity. You can see that the OECD believes business confidence has been sinking:

Our Bottom Line: Economic Growth

It all adds up to lower economic growth forecasts. Starting with 3.9 percent, the drop to 3.0 is close to a whopping 23 percent decrease:

My sources and more: You might want to skim the Global Risks Report 2020. While I would have appreciated some case studies of global economic risk, its 100+ pages are chock full of facts.