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Social and economic costs from COVID-19 to persist long after the pandemic, says World Economic Forum

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The World Economic Forum’s Global Risks Report 2021 has unveiled an alarming risk outlook of short-term healthcare battles and long-term environmental damage and social fragmentation.

“The immediate human and economic cost of COVID-19 is severe. It threatens to scale back years of progress on reducing poverty and inequality and to further weaken social cohesion and global cooperation,” wrote the report.

“The ramifications—in the form of social unrest, political fragmentation and geopolitical tensions—will shape the effectiveness of our responses to the other key threats of the next decade: cyberattacks, weapons of mass destruction and, most notably, climate change.”

The most imminent threats identified – occurring within the next two years – were health related. For instance, fighting infectious diseases topped the list of clear and present dangers in the short-term.

Source: World Economic Forum

In the next three to five years, the report predicts widespread economic risks such as asset bubbles, price instability, commodity shocks and debt crises. Technology is also predicted to break down, as IT infrastructure is tested and cybersecurity threats increase.

The biggest existential threats were geopolitical, singling out weapons of mass destruction and state collapse as the top long-term global risks.

Economic fragility

Working hours equivalent to 495 million jobs were lost in the second quarter of 2020 alone, which wreaked havoc across the global economy.

World output is expected to have shrunk by 4.4 per cent in 2020. In comparison, the 2008-09 Global Financial Crisis caused a 0.1 per cent contraction in the global economy.

Only 28 economies are expected to have grown in 2020. The only G-20 country predicted to grow is China.

Source: World Economic Forum; John Hopkins University & Medicine

The fall out from this economic disruption is expected to hit the most vulnerable hardest. The global recession is expected to force as many as 150 million more people into extreme poverty, increasing the total to 9.4 per cent of the world’s population. This will be exacerbated by gaps in public health and educational disparities.

Businesses have also been shaken up by changing consumer behaviours and technological transformations in the workplace and at home.

Digital divides

Automation, information suppression and gaps in regulation threaten to stymie the progress promised by the digital revolution we are currently in.

“COVID-19 has accelerated and broadened the Fourth Industrial Revolution with the rapid expansion of e-commerce, online education, digital health and remote work. These shifts will continue to dramatically transform human interactions and livelihoods long after the pandemic is behind us,” wrote the report.

“However, these developments also risk exacerbating and creating inequalities. Respondents to the Global Risks Perception Survey (GRPS) rated “digital inequality” both as a critical threat to the world over the next two years and the seventh most likely long-term risk.”

Biases may reduce the accessibility and capacity of automation. This could mean that health diagnostics, investing, education and legal disputes are susceptible to manipulation through algorithmic manipulation.

The control of information and public discourse will be a growing social concern, as governments and tech giants struggle over tech regulation and data protection.

Climate change

A failure to address climate change is one of the most impactful long-term risks identified in the Global Risks Report.

Global CO2 emissions fell by 9 per cent in the first half of 2020, however this will need to be maintained to limit global warming to 1.5 degrees Celcius.

“There is only a short window to redress these disparities. A shift towards greener production and consumption cannot be delayed until economies are revived,” the report stated.

Source: World Economic Forum

Youth disillusionment

Environmental degradation, rising mental health concerns and a disrupted jobs market have heaped pressure onto the global youth.

“Young adults (ages 15–24) around the world are experiencing their second major global crisis within a decade: they entered youth in the throes of the financial crisis, and are now exiting at the outset of a pandemic not seen in generations,” the report wrote.

The rise of the gig economy means that young people now jump between low-paid and short-term jobs.

During the first wave of pandemic lockdowns, about 80 per cent of students shifted to online learning. However this disadvantaged students who lacked the technology or family resources to participate in digital learning, aggravating youth inequalities.

Young people are also leading the fight against systemic issues such as corruption, racial inequality and economic injustice. This creates a risk of intergenerational frictions and greater social divisiveness if different groups are unwilling to work together.

The report draws upon the responses of 650 members of the World Economic Forum. Responses were collected in the annual Global Risks Perception Survey, and was developed in partnership with Marsh McLennan, Zurich Insurance Group and SK Group.

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Ann Wen
Ann is a journalist at Dynamic Business.