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2020 FIGURE IV Evolving Risks Landscape The Global Risks Report 2021 15 Global Risks 2021: Fractured Future CHAPTER 1 REUTERS/CABEZAS The Global Risks Report 2021 16 The immediate human and economic costs of COVID-19 are severe. They threaten to scale back years of progress on reducing global poverty and inequality and further damage social cohesion and global cooperation, which were already weakening before the virus struck. New barriers to individual and collective advancement will likely result from the pandemic as the world faces the sudden disruption of social interactions, a widening digital divide, abrupt shifts in markets and consumer behaviour, loss of education and jobs, and challenges to democracy and international relations. “Digital inequality”, “youth disillusionment” and “social cohesion erosion”—newly included in the Global Risks Perception Survey (GRPS)— were all identified by respondents as critical short-term threats. A digital leap forward—disrupting industry, education, labour markets, and the balance of power between nations— risks widening the gap between the technological “haves” and “have-nots”. All generations and groups have been affected by the crisis: older populations are the most vulnerable to the pandemic itself, and youth face new barriers to social mobility, strains on mental health, uncertain economic prospects and the continued degradation of the planet. Climate change—to which no one is immune, nor can the world vaccinate against it—continues to be catastrophic: “climate action failure” is the most impactful and second most likely longterm risk identified in the GRPS. Billions of people worldwide are at heightened risk of missing out on future economic opportunities, and the benefits of a resilient global community. According to the GRPS, “livelihood crises” will be a critical threat over the next two years, and their impact is likely to continue throughout the decade. The crisis has also challenged national policy-making and international relations in ways that threaten lasting impacts. Institutions and policies to support international coordination were already in decline, and responses to the pandemic have caused new geopolitical tensions. With new stalemates and flashpoints in view, GRPS respondents rated “state collapse” and “multilateralism collapse” as critical threats over the next five to ten years. Despite these challenges, there is also space for building resilience. In this chapter, we close with a reflection on how governments, businesses and societies can begin to take steps for better preparedness in the face of perpetual global risk (see Box 1.1). Damage and disparity The effects of COVID-19, along with some aspects of the policy response, however necessary, have left societies and economies damaged, widened existing disparities within communities and between nations, disproportionately harmed certain sectors and societal groups, and complicated the pathway for the world to achieve the United Nations Sustainable Development Goals by 2030. Economic shockwave The global economy has now sunk to its deepest crisis in peacetime. World output is expected to have shrunk by 4.4% in 2020 (see Figure 1.1).1 In comparison, the 2008–2009 Financial Crisis caused the world economy to contract by 0.1%. Data for the third quarter of 2020 hinted that recovery was underway, but the impact of surging infections in the fourth quarter remains to be measured: many countries were registering more daily cases than they had in the second quarter, when the G20 economies contracted at an annualized rate (see Table 1.1 for data on the seven largest economies).2 The economic contraction is expected to increase inequality in many countries;3 but an Structural fissures exacerbated by the crisis threaten to make the recovery deeply uneven The Global Risks Report 2021 17 uneven economic rebound can exacerbate the inequities. At the time of writing, key capital markets had surged above prepandemic levels,4 yielding gains that will mostly benefit wealthy stockholders. The impact of the pandemic on livelihoods has been catastrophic, especially on those who have no savings, have lost their jobs or faced pay cuts. Working hours equivalent to 495 million jobs were lost in the second quarter of 20205 —14% of the world’s entire workforce.6 At the time of writing, only half were expected to have been recovered by the end of the year.7 Youth, unskilled workers, working parents—especially mothers—and already-disadvantaged minorities have been especially hard hit: 70% of working women across nine of the world’s largest economies believe their careers will be slowed by the pandemic’s disruption,8 while 51% of youth from 112 countries believe their educational progress has been delayed.9 The economic impact varies across regions. The Euro area and Latin America are expected to have contracted the most in 2020.10 Only 28 economies are expected to have grown in 2020, with China the only G-20 country among them.11 In low- and lower-middle-income countries, severe FIGURE 1.1 IMF World Output Projections Forecasts for 2020 Jan 0% Apr Jun Oct Jan Apr Jun 2020 Date of forecast 2019 Oct % and long-lasting humanitarian impacts could be exacerbated by lower levels of financial support and fewer aid workers.12