Keith Nunes 2019KANSAS CITY — Heads of state, business leaders and public policy experts met in Davos, Switzerland, for the World Economic Forum (WEF) annual meeting in mid-January to discuss the state of the global economy. While some presenters appeared hopeful about the near-term and long-term outlook, the group did not identify much to be optimistic about.

For food and beverage businesses sourcing raw materials globally and, especially, multinationals that have invested in and are doing business in both emerging and developing markets, the next few years may be particularly difficult.

United Nations Secretary-General António Guterres called for urgent action on several interconnected challenges, including the global economic crisis, climate, US-China relations, Russia’s invasion of Ukraine and the lingering effects of the COVID-19 pandemic.

As part of the annual meeting, the WEF publishes a Global Risks Report. The report defines risks as events or conditions which, if they occur, will negatively impact a significant proportion of global gross domestic product, population or natural resources.

“As 2023 begins, the world is facing a set of risks that feel both wholly new and eerily familiar,” the report said. “We have seen a return of ‘older’ risks — inflation, cost-of-living crises, trade wars, capital outflows from emerging markets, widespread social unrest, geopolitical confrontation and the specter of nuclear warfare — which few of this generation’s business leaders and public policymakers have experienced.”

New risks identified include unsustainable levels of debt, the beginning of a low-growth, low- investment era and de-globalization, a decline in human development after decades of progress, and the growing pressure of climate change impacts.

In the near term — the next two years — the WEF sees the after-effects of COVID-19 and the war between Russia and Ukraine as continued drivers of inflation and the catalyst for a period of low investment and low growth.

“Governments and central banks could face stubborn inflationary pressures over the next two years,” the report said. “Downside risks to the economic outlook also loom large. A miscalibration between monetary and fiscal policies will raise the likelihood of liquidity shocks, signaling a more prolonged economic downturn and debt distress on a global scale.”

Even more troubling is the WEF sees economic warfare becoming the norm, with more frequent state intervention in markets over the next two years. Specifically, economic policies will be used defensively, to build self-sufficiency and sovereignty, according to the report.

“Intensive geoeconomic weaponization will highlight security vulnerabilities posed by trade, financial and technological interdependence between globally integrated economies, risking an escalating cycle of distrust and decoupling. As geopolitics trumps economics, a longer-term rise in inefficient production and rising prices becomes more likely,” the WEF said.

Global economic progress during the past 80 years has been built on the development of an integrated global economy that allowed for the free movement of goods and services. Now the markets may be seeing the fraying and even breakdown of that integrated global economy.

In the aftermath of the COVID-19 pandemic, food and beverage manufacturers emphasized the need to build resiliency and redundancy into supply chains. The WEF’s Global Risks Report is a harbinger that such attributes are imperative throughout organizations, especially for multinational companies.