The World Economic Forum (WEF) has released its Global Risk Report, which outlines some of the key risks South Africa will face in the coming years.
The forum said that Covid-19 and its economic and societal consequences continue to pose a critical threat to the world as we enter 2022.
“Vaccine inequality and a resulting uneven economic recovery risk exacerbating social fractures and geopolitical tensions. In the poorest 52 countries – home to 20% of the world’s population – only 6% of the population was vaccinated at the time of writing.
“By 2024, developing countries (excluding China) will have fallen 5.5% below their pre-pandemic expected GDP growth, while advanced economies will have exceeded it by 0.9% – widening the global income gap.”
The WEF said this resulting global divergence will create tensions – within and across borders – that risk worsening the cascading effects of the pandemic and complicate the coordination needed to address common challenges, including strengthening of climate protection, improving digital security, restoring livelihoods and social cohesion, and tackling competition in place.
As part of its report, the Forum has listed the top five risks for each of the 124 economies surveyed as part of the World Economic Forum’s Executive Opinion Survey (EOS) between May and September 2021.
Over 12,000 business leaders answered the question, “What five risks will pose a critical threat to your country in the next two years?” and were asked to select them, in no particular order, from a list of 35 risks.
According to the results, South Africa’s top five risks include:
- Prolonged economic stagnation;
- employment and livelihood crises;
- collapse of the state;
- failure of public infrastructure;
- The spread of illegal economic activities.
South Africa was also identified as one of 31 countries, including Argentina, France, Germany and Mexico, with high risks related to “erosion of social cohesion”.
According to the WEF, the erosion of social cohesion is the risk that has worsened the most worldwide since the beginning of the Covid 19 crisis. It is perceived as a critical threat to the world at all timescales – short, medium and long term – and is considered one of the most potentially damaging for the next 10 years.
“In 31 of the 124 countries surveyed in the EOS – including Argentina, France, Germany, Mexico and South Africa among the G20 – the erosion of social cohesion was seen as one of the top ten short-term threats facing their countries.
“Inequalities – economic, political, technological and intergenerational – were already challenging societies before the pandemic widened income inequality.”
These inequalities are now likely to widen further: World Bank research projects that by 2021 the richest 20% of the world’s population will have recovered half of their losses, while the poorest 20% will have lost another 5% of their income.
A separate report released by the World Bank shows that South Africa’s GDP growth is also expected to slow to 2.1% in 2022 as global and regional growth slows.
The group estimates that South Africa’s economy grew 4.6% in 2021 after contracting 6.4% in 2020, reflecting a strong recovery in the mining, manufacturing and services sectors. The recovery slowed in the second half of 2021 due to severe Covid-19 outbreaks, power outages and rising social unrest.
Despite this recovery, the pandemic has reversed at least a decade of gains in per capita income in some countries – nearly a third of the region’s economies, including Angola, Nigeria and South Africa, will see per capita income in 2022 expected to be lower than a decade ago, the World Bank said.
Growth in South Africa is forecast to return to its pre-pandemic trend, with the economy expected to grow by 2.1% in 2022 and 1.5% in 2023.
“Many constraints on long-term growth in South Africa predate Covid-19, including the legacy of weak public finances and slow implementation of reforms needed to boost productivity and job growth.
“Rising public debt and debt-servicing costs will continue to constrain policy space and slash public spending, making gaps in essential public services and infrastructure a major impediment to stronger potential growth.”
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