gdp growth: Failure to build resilience to crises can shave off 1-5% from annual global GDP growth: WEF

Failure to build resilience to crises emanating from climate change, COVID-19 and war in Ukraine is estimated to cost the annual global GDP growth by 1-5 per cent, a new research by the World Economic Forum (WEF) showed on Friday. “Climate change, COVID-19 and war in Ukraine are world-shaping events accelerating crises from growing hunger, refugee flows and inequality to shocks in supply chains, energy prices and global growth. Companies and countries need to pivot rapidly from reactive risk management to strategic recovery so they are better prepared for the next crisis,” the WEF said.

Findings of the research, released ahead of the WEF Annual Meeting 2022 in Davos, suggested that the “the cost of failure to build resilience to crises is between 1 per cent and 5 per cent of annual global GDP growth.”

For example, workforce attrition during COVID-19 shaved 3.6 per cent off growth in some countries while disruptions to energy and supply chains driven by current crises are wiping an estimated 1-2.5 per cent off the global GDP.

Resilience comprises a set of strategic capabilities for achieving long-term, sustainable and inclusive growth, while a shared framework is a prerequisite for a coordinated, systematic approach to resilience.

“It would provide organisations with a common resilience language, structure and objectives, and guidance on how to protect and enhance sustainability and inclusiveness in an environment of more frequent crises and disruptions,” the WEF said.

The United Nations, the WEF, McKinsey Global Institute, the International Monetary Fund and other leading organisations estimate that a significant share of annual GDP growth will depend on the degree to which organizations and societies develop resilience.

“Growth differentials of between 1 per cent and 5 per cent globally can be expected depending on how leaders respond to the many challenges, including climate change, the energy transition, supply-chain disruptions, healthcare availability, and income, gender and racial inequalities,” the WEF said.

The WEF, in collaboration with McKinsey & Company, said it is also launching the Resilience Consortium, a new public-private leadership effort to drive global resilience. The consortium is bringing together leaders from the public and private sectors who are committed to advancing resilience globally – across regions, economies and industries.

The aim is to develop a shared, comprehensive view of resilience and its drivers to help policy-makers and business leaders recognise the opportunities and lay the foundations of sustainable and inclusive, long-term global growth.

WEF President Borge Brende said: “Building greater resilience has become a defining mandate for this generation. The war in Ukraine is having a devastating impact not only on the people of the region but also knock-on effects on global commodity prices that may cause political and humanitarian crises in other parts of the world”.

“There is an urgent need for more collective action and coordination by the public and private sectors to mitigate risks and sustain growth against disruptive shocks, especially among the most vulnerable populations. Policy decisions and financial commitments made today will determine the future course of the planet, economies and societies. Now is the time for action,” he added.