Inflation, debt crisis major risks

Bangladesh's economy faces five major risks in the next two years, the top three being sustained inflation, debt crises and severe commodity price shocks, according to a report released by World Economic Forum (WEF). 

Human-made environmental damage and geopolitical contestation of resources are the remaining two, said The Global Risks Report 2023.

The report presents results of a Global Risks Perception Survey (GRPS) based on the latest insights of over 1,200 experts across academia, business, government, the international community and civil society.

Responses for the GRPS 2022-2023 were collected from September 7 to October 5 of 2022, said the report.

The survey participants were asked to select five risks from a list of 35 which they thought would most likely pose the biggest threat to their countries in the next two years.

In Bangladesh, the Centre for Policy Dialogue was the WEF's partner for the survey.

Rapid or sustained inflation was selected as the most frequently selected risk here, according to the report.

Inflation has been hovering at around 9 per cent over the past couple of months.

Consumer prices, which rose to a 10-year high of 9.52 per cent in August, came down to 8.71 per cent in December last year on a point-to-point basis, meaning compared to that same period in 2021, according to the Bangladesh Bureau of Statistics.

"The years 2023 and 2024 are not looking bright," said CPD Executive Director Fahmida Khatun yesterday.

Global inflation is a big challenge and Bangladesh will not remain immune from the price spike due to its import dependence. The pressure of imported inflation and cost of living will be there, she said.

Besides, the ratio of internal debt to gross domestic product (GDP) is increasing although the ratio of external debt to GDP remains low. But repayment pressure will increase, she said.

The GRPS report finds that the cost-of-living crisis, natural disasters, extreme weather events and geoeconomic confrontations were the top three risks the world would be facing in the next two years.

Failure to mitigate climate change, erosion of social cohesion and societal polarisation were also named as global risks for the short term.

The report said the return to a "new normal" following the pandemic was quickly disrupted by the outbreak of the Russia-Ukraine war.

It ushered in a fresh series of crises in food and energy, triggering problems that decades of progress had sought to solve, it said.

"As 2023 begins, the world faces a set of risks that feel both wholly new and eerily familiar," it added.

"We have seen a return of 'older' risks…which few of this generation's business leaders and public policymakers have experienced," it said.

The "older" risks are inflation, cost-of-living crises, trade wars, capital outflows from emerging markets, widespread social unrest, geopolitical confrontation and the spectre of nuclear warfare.

These are being amplified by comparatively new developments in the global risks landscape, including unsustainable levels of debt, a new era of low growth, low global investment and de-globalisation, it added.

"Geopolitical fragmentation will drive geoeconomic warfare and heighten the risk of multi-domain conflicts," said the report.