Chronic fiscal imbalances, major systemic financial failure and severe income disparity are seen as top risks for the world economy in the next decade, the World Economic Forum (WEF) said in its Global Risks 2012 report on Wednesday.
"Being in the forefront of public debate in recent years, chronic fiscal imbalances and severe income disparity emerged this year as the two most likely economic risks to manifest in the coming 10 years," the WEF said in the report, published in preparation for the annual meeting of business leaders, policymakers and academics at Davos, Switzerland, later this month.
The survey found that severe income disparity and chronic fiscal imbalances were the most likely risks to manifest in the next decade while major systemic financial failure received high-impact scores.
"The potentially potent combination of chronic labor market imbalances, chronic fiscal imbalances and severe income disparity, when amplified by extreme demographic pressures, could lead to a retrenchment from globalization and the emergence of a new type of critical fragile states – formerly wealthy countries that descend into a spiral of decay as they become increasingly unable to meet their social and fiscal obligations," the report said.
In emerging economies, the context and the challenge is different, the report said.
"Rapid economic growth in emerging economies has fuelled an impatient expectation that a rising tide will lift all boats, but social contracts may not be forged quickly enough to rectify increasingly visible economic inequalities and social inequities."
Failure to meet demands for civil and political rights could also have harmful consequences, the report said.
The report is based on a survey of 469 experts from industry, government, academia and civil society and surveys 50 global risks across five categories: economic, environmental, geopolitical, societal and technological. The survey assesses the perceived impact and likelihood for each risk over a 10-year time horizon using a five-point scale to indicate the severity of impact.
