24 January 2009

World faces risks from climate change to China slump

By Jeremy Gaunt, Reuters, Jan 24, 2009 8:04am IST


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LONDON (Reuters) - Deteriorating government finances, a plunge in China's economy and threats to food and health from climate change are among the major risks facing the world today, the World Economic Forum said on Tuesday.

It also said there is great danger in the world's varied approaches to global governance -- essentially uncoordinated responses by governments to globally entwined problems.

The report -- Global Risks 2009* -- was released by the WEF, a business and academic think tank, ahead of its annual meeting in Davos, Switzerland, on January 28 to February 1.

It said policy makers and business leaders needed to combat the rising risks now but also should be careful not to make things worse in the long run.

"The economic outlook for 2009 is a grim one for most economies; markets remain volatile, liquidity has not returned, unemployment is rising, and consumer and business confidence has fallen to record lows," the report said.

"In this climate, risks become even more potent in their impact and ... the tendency towards panic and short-term responses are more pronounced."

The report lists 36 risks to the world, broken down into five categories -- economic, geopolitical, environmental, societal and technological.

Under the first category, for example, it notes a danger that the U.S. slowdown could drag China's economy down to a 6 percent annual growth rate, far lower than the official target of 8 percent.

This would have a significant impact on the already ailing global economy because of China's role as a major producer and its status as a massive net creditor with other economies.

The report also warns that despite major losses that have already hit investors and financial markets, there is continued scope for prices of assets such as equities, houses and corporate bonds to fall this year.

All Change

The world also faces increased environmental risk, including those linked to climate change, the WEF said.

It cited inland and coastal flooding, air pollution and biodiversity loss, as well as droughts and desertification.

Many of these threats are interlinked.

"Nearly half the world's population already live in high water stresses areas and the links to food security, geopolitical and health risks," it said.

Related to this, the WEF saw an increased risk to the world from chronic diseases to go along with the threat of pandemic flu and the spread of HIV/AIDS and other infectious diseases.

A new risk listed by the forum, meanwhile, is what it sees as a gap in global governance.

"The absence or lack of effective and inclusive governance on global issues such as financial stability, trade, climate change, water and security (is) a source of risk in and of itself," the report said.

"Weak global governance sits at a central position between geopolitical, economic and environmental risks."

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