The global economic outlook is darkening, with geopolitical tensions and economic fragmentation rising to the top of business concerns, according to the World Economic Forum’s (WEF) Global Risks Report. The report, drawing on insights from over 1,300 global experts, paints a picture of sustained turbulence and a world “sitting on a precipice,” as described by WEF Managing Director Saadia Zahidi.
Geoeconomic Confrontation Takes Center Stage
For the near term – the next two years – geoeconomic confrontation has emerged as the most significant risk, surpassing previous concerns like natural disasters or technological failures. This shift reflects increasing competition between nations and a growing trend toward the weaponization of economic tools, including tariffs, regulations, and control over supply chains, and capital. The WEF report warns that this confrontation could lead to a substantial contraction in global trade.
Half of the business executives and leaders surveyed by the WEF anticipate turbulent times over the next two years, with a mere 1% expecting a period of calm. This pessimism underscores a broader sense of unease about the stability of the macro environment, fueled by the unpredictability of world events and a perceived erosion of established norms and relationships.
A Negative Outlook Persists
The negative sentiment extends beyond the short term. ’s report reveals that 57% of respondents characterize the long-term outlook – spanning the next decade – as equally turbulent or stormy. This suggests a deep-seated concern that current disruptions are not merely temporary setbacks but rather indicative of a more fundamental shift in the global landscape.
The report highlights a lack of predictability and a growing concern over the stability of long-standing relationships. This angst is particularly acute given the increasing pressure on historic relationships due to heightened confrontation between global powers.
The Rising Threat of Artificial Intelligence
While geoeconomic risks dominate the near-term concerns, the potential adverse outcomes of artificial intelligence (AI) have experienced the most significant increase in perceived risk. The report doesn’t detail the specific nature of these risks, but their rapid ascent in the survey indicates a growing awareness of the potential downsides of increasingly sophisticated AI technologies.
Convergence of Risks
The WEF’s analysis emphasizes that these risks are not occurring in isolation. Instead, geopolitical, societal, environmental, and technological disruptions are converging, creating a complex and interconnected web of challenges. This convergence amplifies the potential impact of individual risks and makes it more difficult to develop effective mitigation strategies.
The report underscores the importance of evaluating these emerging systemic risk challenges, defined as those that could negatively impact a significant proportion of global GDP, population, or natural resources. Executives are urged to use the report’s findings to assess the implications for their organizations, both in the near term and over the long term.
Davos Context and Expert Insights
The Global Risks Report is released annually in conjunction with the World Economic Forum’s Annual Meeting in Davos, Switzerland. This timing allows for direct engagement with global leaders and facilitates discussions on the most pressing challenges facing the world. The report serves as a key discussion point at the Davos conference, informing debates and shaping policy agendas.
Saadia Zahidi noted that nearly a third of respondents are “very concerned” about the implications of global power rivalries and strategic standoffs for the global economy in . This concern reflects a growing recognition that geopolitical instability poses a significant threat to economic growth and stability.
Implications for Businesses
The WEF’s report serves as a critical risk assessment tool for businesses operating in an increasingly volatile world. The findings suggest that companies need to prioritize resilience, adaptability, and a proactive approach to risk management. Specifically, businesses should focus on diversifying supply chains, strengthening cybersecurity defenses, and developing strategies to navigate potential trade disruptions.
The emphasis on geoeconomic confrontation also highlights the need for companies to carefully monitor geopolitical developments and assess their potential impact on market access and investment decisions. The rising concerns about AI underscore the importance of responsible innovation and the need to address the ethical and societal implications of this rapidly evolving technology.
The overall message from the WEF’s Global Risks Report is clear: the world is entering a period of sustained turbulence, and businesses must prepare for a future characterized by uncertainty and disruption. The report provides a valuable framework for understanding the key risks and opportunities that lie ahead, and for developing strategies to navigate this challenging environment.
